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RAILWAY PROBLEMS IN CHINA 



BY 

MONGTON CHIHjHSU, B. S., M.A. 



SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS 
FOR THE DEGREE OF DOCTOR OF PHILOSOPHY 

IN THE 

Faculty of Political Science 
Columbia University 



9 6 



NEW YORK 
1915 






RAILWAY PROBLEMS IN CHINA 



BY 

MONGTON CHIH HSU, B. S., M.A. 



SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS 
FOR THE DEGREE OF DOCTOR OF PHILOSOPHY 

IN THE 

Faculty of Political Science 
Columbia University 



NEW YORK 
1915 



Copyright, 1915 

BY 

The Faculty of Political Science of 
Columbia University, New York 



H 



PREFACE 

The purpose of this work is to present the important 
economic and political problems of railway development 
in China. In the body of the treatise no attempt 
has been made to set forth, in detail, the technical 
and administrative questions involved in the work of 
building and operating railways. In view of the fact that 
most of the railways in China have been built with foreign 
capital, the author has attempted to analyze carefully the 
railway loan agreements in order to throw some light upon 
the preserif "status ot railway management and construction. 
^ As the railway has recently occupied the center of interest 
e£ in the internal and foreign politics in the country, a great 
part of the material of the treatise is, therefore, focussed 
upon the political phases of the railway situation. 
=> The author desires to acknowledge his indebtedness to 
Professor Edwin R. A. Seligman for his invaluable instruc- 
tion and advice in the conduct of the work. Acknowledge- 
S ments are due also to Professor H. R. Mussey, who kindly 
2 read the treatise in proof and made many useful criticisms 
8 and suggestions, and to Mr. Hugh W. Robertson for his 
assistance in adapting the manuscript for the press. 

M. C. H. 
233] 5 



27 



CONTENTS 

PACK 

CHAPTER I 
Introduction n 

FIRST PERIOD 

CHAPTER II 
A Discouraging Beginning 19 

SECOND PERIOD 

CHAPTER III 
The Struggle for Railway Concessions 

i. Foreign Political and Strategical Railways 28 

ii. Railways Granted to Foreign Capitalists 34 

iii. Railway Spheres of Interest 45 

CHAPTER IV 

The Foreign Railways 

i. The Chinese Eastern Railway 52 

ii. The Shantung Railway 56 

iii. The Yunnan Railway 58 

CHAPTER V 
Railways Built with Foreign Capital 

A. The British Interests: 

i. The Chinese Government Railways of North China .... 65 

ii. The Shanghai-Nanking Railway 69 

iii. The Tao-Ching Railway 71 

B. The Belgian, French and Russian Interests: 

i. The Peking-Hankow Railway 74 

235] 7 



8 CONTENTS [236 

PAGE 

ii. The Peinlo Railway 78 

iii. The Cheng-Tai Railway 81 

C. The American Interests. 

THIRD PERIOD 

CHAPTER VI 
Provincial and Private Enterprises 

i. The Hsinning Railway 92 

ii. The Kiukiang-Nanchang Railway 93 

iii. The Fukien Railway 94 

iv. The Shanghai-Hangchow-Ningpo Railway 95 

v. The Szechuan-Hankow Railway 99 

CHAPTER VII 
The Railways Built by the Chinese Government 103 

CHAPTER VIII 
Nationalization of Railways 

i. The Conflicts of Interests 108 

ii. The Government's Railway Policy 120 

CHAPTER IX 
International Co-operation 

i. The Canton-Kowloon Railway 133 

ii. The Tientsin-Pukow Railway • . 135 

iii. The Hukuang Railways 140 

iv. The Lung-Tsuing-U-Hai Railway 154 

v. The Sinyang-Pukow Railway 157 

vi. The Shasi-Shingyifu Railway 159 

CHAPTER X 
The Manchurian Railway Problems 163 

CHAPTER XI 
Conclusion 176 



Approximate Equivalents of Chinese Currency, 
Weights and Measures 

i. — Money 

Until the new National Coinage Act was promulgated by 
a Presidential Mandate on Feb. 27, 1914, the monetary unit 
commonly used was the " tael." It fluctuated greatly in 
value. The Haikwan (customs) tael was not a coin but a 
weight in silver by means of which duties were paid to the 
Maritime Customs. The average exchange value of the 
Haikwan tael during recent years has been as follows : 
1907, 79 cents gold; 1908, 65 cents; 1909, 63 cents; 19 10, 
66 cents; 1912, 67 cents. 

In June, 1912, one Haikwan tael = 
2s. 9d. 
3.47 francs. 
2.81 marks. 
0.67 gold dollar. 
1.50 yen (Japanese). 
1.50 Mexican dollar. 

ii. — Weights 

I catty =15/} lbs. or 604.53 grammes. 

I picul = i33J<3 lbs. or 60.453 kilogrammes. 

iii. — Length 

1 ch'ih = i4.i inches or 0.358 metres. 

1 li = about one-third of a mile (or theoretically 2,115 feet or 
two-fifths of a mile). 

iv. — Area 
1 mow (Shanghai) = one-sixth of an English acre. 

v. — Capacity 

1 tow (for tribute) =629 cubic inches (10.31 litres). 

237] 9 



CHAPTER I 

Introduction 

In a country so vast in territory and so dense in popula- 
tion as China it is natural that arterial communication is 
necessary. Serious efforts have been made by China's 
rulers to connect the four quarters of the country by both 
land and water routes. Therefore, long before the intro- 
duction of the steamer and railroad into China, intercom- 
munication had already taken place between the different 
parts of the country, even those most remote. In olden 
times when the country was flourishing long j:anals and 
grand highways were usually kept in good order. Until 
very recently, however, waterways and river embankments 
had been neglected and repairs on roads had been practically 
abandoned. Now they are almost impassable. At the 
present there are still many old trade routes in the country 
and owing to the small mileage of railroads in China old 
methods of communication and transportation are still 
maintained. 

Land Transportation. The chief means for conveying 
travelers on land are the sedan chair, the mule litter, the 
cart (used only in the North), horses, mules and donkeys. 
The horse is most expeditious, while the sedan chair is most 
comfortable but most expensive. Commodities are carried 
by barrows (sometimes also used for travelers and mostly 
used in the South), pack horses, mules, donkeys, camels and 
for short distance, oxen. A horse or mule will carry 240 
to 320 pounds. Camels will carry still more, but are used 
239] 11 



I2 RAILWAY PROBLEMS IN CHINA [240 

only in the North. A wheelbarrow will carry, as a rule, 
180 to 300 " catties " (240 to 400 pounds), and will make 
about 16 miles a day. Carts can carry more than these 
wheelbarrows. 

There are many trade routes on land. The principal 
ones are those which connect the big cities, and these cities, 
in turn, with the capital. From Peking several highways 
branch in various directions leading to Mongolia, Man- 
churia, Central Asia, the west and the southwestern parts 
of China proper. The trade route from Peking to Man- 
churia has been recently displaced by a railroad. It takes 
months to travel overland from Peking to the northern, 
western and southern corners of the country. From Nan- 
kow Pass, north of Peking, there is a caravan route extend- 
ing to the North and Northwest. Journeys are generally 
divided into stages of about thirty miles each. In the 
South the ordinary road is a mere path generally defined 
by neither ditches nor hedges, winding through the paddy 
fields or over the uplands. In the North, where carts are 
used, it is a common thing to see a new track cut right 
across a field of growing wheat in spite of the efforts of the 
owner to prevent it. There are traces in many places of 
ancient pavements, but these have almost wholly disap- 
peared, and the road is simply a bank of earth. 

Water Transportation. Nowadays a number of steam- 
boat companies are organized and run steamers regularly 
on the navigable rivers, canals and lakes, and even along 
the sea coast. Where steam is prohibited, native " slipper " 
boats, house boats and junks of various sizes are used. For 
coast and sea-going work, junks of large and strong propor- 
tions with large sails are still occasionally seen. 

The Yangtsze, which is navigable for some 2000 miles, 
the Hwai, the Han, the West and the Peiho rivers are great 
arteries of commerce. The Grand Canal is now practically 



241] INTRODUCTION l ^ 

worthless for transportation from the South to the North, 
although it was once the chief route of traffic. Steam navi- 
gation along the coast takes its place now. Some sections 
of the Grand Canal and the Hoangho are still useful but 
only for local traffic. 

In the maritime provinces and the Yangtsze Valley 
waterways are numerous. The perfect network of water- 
ways, partly natural and partly artificial, in Kiangsu, in 
connection with the Yangtsze River and the Grand Canal, 
furnishes cheap and comfortable communication with all 
parts of that province. There are lakes of considerable 
size by which communication is carried on with the differ- 
ent provinces in Central China. The Wuhu, the Taihu, 
the Poyang, the Tungting and other lakes, with the water- 
ways branching in various directions from them, furnish 
good water communication with the adjoining regions. 

The costs of travel and of freightage vary from year 
to year with the means of transportation, with the seasons 
of the year and differ, also, in different parts of the coun- 
try. Land transportation is usually, as in other countries, 
more expensive than water transportation. Competition, 
however, is a decisive factor. No matter whether it be be- 
tween the same kind or different kinds of conveyance, or 
between water and land routes, where there is keen com- 
petition, passenger tariffs and freight rates are usually much 
lower. 

Over these trade routes and by the old means of trans- 
portation mentioned above, Chinese produce and merchan- 
dise were carried from one part to another of the country 
long before the Occidental world became civilized. But as 
China, owing to her geographical position and her endow- 
ment of abundant resources for self-support was absolutely 
cut off from the rest of the world for so long a time past, 
no impetus was given to her to develop fully her systems 



I4 RAILWAY PROBLEMS IN CHINA [242 

of communication. On the contrary, internal communi- 
cation has been gradually falling into greater and greater 
neglect. The defective condition of communication kills 
trade on its way inland and paralyzes the authority of 
Peking a few hundred miles from the capital. The grow- 
ing weakness of the Peking Government has, for a long 
time past, been becoming more and more apparent to the 
people and the officials, whose confidence had been com- 
pletely shaken, even before the shock of recent political 
events. Absence of communication means failure of con- 
trol, lack of power, want of grip, causes which chiefly ex- 
1 plain the frequent occurrence of rebellions. 

On the other hand, foreign nations have, one after an- 
other, closed in upon China both by land and by sea. The 
expansion of foreign commerce, the lust for territorial ac- 
quisition and the intense international struggle for power 
and influence throughout the world, animated by modern 
national imperialism, have naturally resulted in demands 
for concessions of territories for coal stations and commer- 
cial ports and for extra-territorial jurisdiction over the 
places where citizens or subjects of the respective countries 
reside. Above all, they have demanded concessions of 
rights for construction and even control of railways in or- 
der to increase their own resources through the absorption 
or exploitation of the undeveloped but vast and wealthy 
realm of the Celestial Empire. Several foreign nations, 
principally Russia, Germany, France, Great Britain and later, 
Japan, have taken an aggressive part in this movement. 
Concession after concession was forced out of the hands 
of the Peking Government. Railway concessions, stand- 
ing above all others in value, have been and are still most 
eagerly sought and retained because railways can be used 
politically to strengthen the concessionaires' hold on China 
as well as to develop commercially their concessions of 



243] INTRODUCTION I5 

mines and other enterprises. In modern times the railway 
is the best and most effective instrument for colonization 
and for accomplishing the policy of imperial expansion. It 
is no wonder, therefore, that international politics in China 
are mostly railway politics. / 

Keeping this in mind, one will not be surprised to find 
that a foreign railroad loan in China is quite different from 
that in the United States and in many other countries. In 
the United States or elsewhere a railroad loan raised abroad 
is commonly regarded as a commercial transaction between 
two parties, while in China it means a political issue between 
two or more nations. To present the different important 
phases of the railway problems in China, it is advisable, 
however, to trace the various stages of their development in 
connection with the local growth of the railway itself. The 
history of railway development in China may be divided 
into three periods : 

(i). The first period began in 1863 and ended in 1894. 
At the very beginning the first attempt to introduce the 
" iron highway " into China was discouraging, not unlike 
what had been experienced in the United States, England 
and elsewhere, owing to the opposition of the conservative 
class of the people. Later on, however, a small number of 
influential and enlightened officials, who realized the im- 
portance of the railway to the prosperity of the country, 
succeeded, in the face of manifold obstacles and in spite of 
endless discouragement, in creating the first instalment of 
the railway system now known as the Chinese Government 
Railway of North China. 

(2). The second period, extending from 1895 to 1905, 
was marked by the " Battle for Concessions " in which the 
struggle for the right of way for railway construction and 
for financing was the most notable feature. Before this 
period no railway concession had been granted to foreigners. 



j6 RAILWAY PROBLEMS IN CHINA [244 

After 1895 they were given so many concessions that the 
Boxer Trouble was practically precipitated as a result. In 
this period we find that notorious terms were stipulated 
in railway loan agreements. 

(3). The third period, commencing during the Russo- 
Japanese War and extending to the present, is characterized 
by the appearance of native private enterprises, the conflict 
of interests between the provincial companies and the Cen- 
tral Government due to the adoption of the Nationalization 
Policy, the financial combination of some foreign syndicates, 
and the settlement of the question of control to a certain 
extent in regard to loan funds. During this period 
railway loans were contracted on more favorable terms than 
in the last period. 



1 




c 



"^ 



r 



FIRST PERIOD 



CHAPTER II 
A Discouraging Beginning 

In_i863 li twenty-seven foreign firms sent a petition to J 
Li Hung-chang, then governor of Kiangsu, applying for 
the concession of the right to establish a line between 
Soochow and Shanghai. Their petition, however, was re- 
ceived with decided disapprobation, and the scheme was 
finally abandoned. At about the same time, Sir Macdonald 
Stephenson drew up a comprehensive scheme ) for railway 
construction in China and presented it to the Manchu Gov- 
ernment. His document for some reason was pigeon-holed. 

The next move emanated from Shanghai. On the appli- 
cation of Messrs. Jardine, Matheson & Co. to construct an 
ordinary road from Shanghai to Woosung, about twelve 
miles down the Whangpoo River, a permit was issued in 
which it had been made particularly plain upon both sides 
that only animals could be used for motive power. The 
employment of steam was specifically forbidden. But in 
1875 when the road was completed, the company, ignoring 
the protest of the natives, laid down upon it a two-foot-six- 

1 Raihuays in China, by Sir Macdonald Stephenson, 1864. Stephen- 
son took Hankow as a starting-point and proposed to construct 
lines eastward to Shanghai and westward through the provinces of 
Yunnan and Szechuen to India. While a line was to run from Han- 
kow southward to Canton, another line from Chinkiang to Peking via 
Tientsin was projected. It was also proposed to connect Ningpo with 
Shanghai, and to carry a line from Soochow to the province of Fukien. 
In addition to these lines a connection between Canton and the pro- 
jected line to India was suggested. 

247] 19 



20 RAILWAY PROBLEMS IN CHIXA [248 

inch gauge railway and used a locomotive to haul the cars. 
The people in the neighborhood of the line became greatly 
excited. Petition after petition was sent in to the pro- 
vincial authorities asking that the company keep its promise. 
^li was not until a laborer was run over and killed by the 
^ locomotive that the Central Government directed the pro- 
vincial authorities to have the concession canceled. After 
some troublesome diplomatic negotiations this first railway 
was repurchased by China in 1877. The closing chapter 
of the history of this enterprise points to the tearing-up of 
the track and the shipment of the rolling stock, rails and 
' sleepers, to the Island of Formosa. The wretchedly advised 
course of action taken by the company could only delay the 
introduction of the railway into China for a short time, be- 
cause a few years later a successful attempt to introduce 
the " iron horse " was made in the North. 

In 1878, Li Hung-chang, now Viceroy of Chihli, be- 
came interested with Mr. Tong King-sing in establishing 
a colliery in Tangshan. The Chinese Engineering and 
Mining Company was then formed. From this point to 
Pehtang, the nearest point for shipping coal by w r ater routes, 
was about thirty miles. The question of transportation 
became vital to the success of the company. A canal 
was then constructed from the colliery to Lutai, the nearest 
point on the Pehtang River. There were seven miles be- 
tween Hsukochung, on the end of the canal, and the colliery ; 
and to cover this distance .3. mule tramway of standard 
gauge was built in 1880 after a hard fight by the resident 
engineer, Mr. C. \Y. Kinder. After the completion of this 
tramway a determined effort was made to introduce the 
railroad into China. Without consulting Peking, Mr. 
Kinder built a locomotive, christened " The Rocket of 
China," on June 9, 1881. The locomotive was made out 
of old iron and steel picked up at the mines and a portable 



249 ] A DISCOURAGING BEGIN X IX G 21 

winding engine. After inducing the authorities to with- 
draw their objection to its use Mr. Kinder put the " Rocket " 
into commission on construction work. 

The initial venture of the railway from Hsukochung was , 
a success and two additional locomotives were secured in 
1882. Mr. Kinder then began to urge the extension of the 
tramway tcTTTuTai and "succeeded with the assistance of 
Viceroy Li Hung-chang, now impressed with the value of 
the railway. TheKaiping Railway Company was then / 
formed with a capital of about $500,000 (Mex.) to take over 
the tramway and carry out the construction of the exten- 
sion. Dr. Wu Ting-fang was appointed to manage the 
company. Work was begun at Hsukochung in 1886 and 
six months later it was completed. At the same time some 
rolling stock, including an American locomotive and forty 
ten-ton coal cars, was purchased from the United States. 

The experiments of these two initial railroads had, with- 
out ^doubt, an important educational effect. This can be 
seen in some of the memorials * presented to the Throne by 
some of the learned officials. The testamentary declaration 
in favor of railroads, warships and other foreign appliances, 
as an essential means of enabling China to keep abreast of 
other civilized nations, written by Viceroy Tso Tsung-tang, 
the suppressor of the Mohammedan rebellion in Kansuh 
and Turkestan, helped greatly to hasten the acknowledg- 
ment of the importance of Chinese railways. 

But the chief impulse which led to the official acceptance 
of the modern system of transportation, as an institution, 
was supplied by the war with France in [884. The diffi- 
culty of sending troops to Tongking convinced the Govern- 
ment of its essential value as a means of military transport. 

^ce Knang-su Choncj-yau (The Emperor Kuang-su's State Papers), 
vols, xi-xv, inclusive. 



22 RAILWAY PROBLEMS IN CHINA [250 

By 1887 the Kaiping line was completed to Lutai; and 
Li Hung-chang had a memorial before the Imperial authori- 
ties urging the extension of the line to Tongku and on to 
Tientsin on the plea that such a road was a military neces- 
sity and would tend to the better protection of the empire 
from invasion. Meanwhile, the Board of Admiralty, stimu- 
lated by the Marquis Tseng, also presented a memorial to 
the Throne, in which they proposed the construction of a 
railway from Taku to Tientsin and Shanhaikwan, for the 
purpose of facilitating the mobilization of troops in those 
places and also for the transportation of coal which they 
described as " the life and the pulse of the navy." These 
two memorials fortunately struck the right chord and the 
Empress Regent issued an edict 1 formally approving the 
construction of a railway in China. The name of the com- 
pany was then changed to " China Railway Company " and 
a prospectus 2 was issued advertising for the subscription 
of Tls. 1,000,000, the Hongkong and Shanghai Banking 
Corporation being made bankers. 3 It was, however, with 
great difficulty that the promoters succeeded in financing 
the scheme. 

In April, 1888, the section to Tongku was completed; in 
August, Tientsin was reached. In 1890, the section to the 
east of Tientsin was completed to Kuyeh. By 1891 the ex- 
tension to Shanhaikwan was authorized and the Chinese 
Imperial Railway Administration was formed with Mr. 
Kinder as Engineer-in-Chief to carry on the work which 
was completed in 1894. 

Besides the above actual progress, other projects were ad- 

1 For full text of edict, see Appendix C in R. S. Grundry's China 
Past and Present, London, 1895. 

2 See Appendix D in the same book, and U. S. Consular Reports, 
vol. xxiii, no. 81, p. 66. 

3 The bankers were Englishmen and the bank is a British institution. 



251] A DISCOURAGING BEGINNING 23 

vocated by quite a number of officials. In February, 1889, 
the Viceroys and Governors throughout the Empire were 
commanded to advise the Throne on the subject of railways. 
Two of these memorials x were received with great atten- 
tion, namely, those of Liu Ming Chuan (Governor of 
Formosa) and Chang Chih-tung (Viceroy of Liang Kuang). 
The former advocated strongly the advisability of continu- 
ing the Tongku-Tientsin line to Tungchow, while the latter 
urged the construction of a trunk line from Lukowchiao 
(a village near Peking) to Hankow, an important indus- 
trial and commercial center on the Yangtsze River. The 
Tungchow project was, however, strongly opposed by the 
reactionary party who maintained that as railways would 
facilitate the transport of foreign troops and as Tungchow 
was only twelve miles from Peking the capital would be 
dangerously exposed to foreign attack in case of an in- 
vasion. This opposition was carried to such an extreme de- 
gree that it not only blocked the decree but incited a riot 
of the junk owners whose business on the Peiho River had 
suffered more or less by the competition of the railway. 
The riot was not quelled until the Viceroy ordered the 
destruction of the bridge connecting the Foreign Settle- 
ment and South Tientsin, thus placating the junk owners 
by facilitating the shipping demand. 

Meanwhile permission had been granted to continue the 
railway beyond the Great Wall at Shanhaikwan. At the 
outbreak of the war with Japan in 1894, the line had been 
extended to Chung-hou-so, forty miles beyond Shanhaik- 
wan. The line between Tientsin and Shanhaikwan. how- 
ever, a distance of 174 miles, was the only one in operation 
in this period. The Chung-hou-so extension was still 
under construction when the war broke out and several 

1 Kuaug-su Cliong-yau, vol. xv, leaves 9-12 and 12-15. 



24 RAILWAY PROBLEMS IN CHINA [252 

branch lines had been projected. Surveys were also made 
160 miles from Chung-hou-so to Kirin, the center of Man- 
churia. During the war with Japan work on the road was 
naturally interrupted suddenly and was resumed afterwards 
only by overcoming much political opposition and many 
financial difficulties. The close of the war marks the close 
of the first period of railroad development in China. 

General References 

U. S. Consular Reports, vol. x, no. 34 (1883) ; vol. xxiii, no. 81 (1887) ; 
vol. xxvi, no. 96; vol. xxix, nos. 101 and 103. 

C. Denby and E. P. Allen, " Chinese Railway Development," in Engi- 
neering Magazine, London, 1898, vol. xvi, pp. 339-348. 

R. E. Bredon, Railway and Inland Taxation, Shanghai, 1897. China: 
Statistical Dept., Special Series, no. 22. 



SECOND PERIOD 



CHAPTER III 

The Struggle for Railway Concessions 

Throughout this period railway politics took a very 
important and significant part in the campaign of interna- 
tional politics played in China. The_s_truggle_for railway 
concessions came hand in hand with the " Battle for Con- ./ 
cessi ons " * waged f rorr{~i8Qo~ To~iQoa ] The latter desig- 
nates the occupation of territ< »ry under the guise of lease, the 
securing of rights or grants for the working of mines, the 
construction and management of railways, and the enjoy- 
ment of special or exclusive financial and commercial privi- 
leges in China, either by the interested foreign governments 
separately or in combination, or by the foreign syndicates 
backed by their respective governments to carry out a cer- 
tain design, political, military, commercial or otherwise. 
It is evident, therefore, that in order to clear up the com- 
plicated position taken up by the railway in this " Battle," 
it is necessary to touch upon some of the influences and 
causes, the development and result of which were utterly 
unexpected. 

Railway concession has occupied many volumes of diplo- 
matic correspondence found in the Colored Books of the 
different governments, especially those published from [897 
to 1901. In the "Battle for Concessions" the private 
speculator in railways appeared on the scene to worry the 
Chinese Government, but behind him, in addition, was the 

1 According to Lord Salisbury's description; see British Blue Book, 
China Affairs, no. 1, 1899, dispatch no. 232. 

2551 2 7 



2 8 RAILWAY PROBLEMS IN CHINA [256 

whole diplomatic force of his country. Later, the bankers, 
encouraged by their governments to finance railway con- 
struction in those regions which the latter had marked out as 
their sphere of political influence or of pecuniary interest, 
secured for the money market the issues of loans and for 
the trade of their respective countries orders for the ma- 
terials required. 

The subject is very complex and rapidly changing in dif- 
ferent phases. It is only possible to indicate briefly the 
essential points which have an intimate relation to the rail- 
way development of China. Let us now, first of all, trace 
the causes and events which, being political and strategical 
on the one hand and financial and commercial on the other, 
led to the struggle for railway concessions and to the sub- 
sequent controversies and troubles between China and the 
Powers, and even dissension among the Powers themselves. 
The railways given away by China under the circumstances 
created by these events and causes may be accordingly 
divided into two distinct categories, according to the pur- 
poses of their promoters, vis. : ( 1 ) those granted for political 
and strategical reasons; (2) those granted for commercial or 
capitalistic reasons. 

Foreign Political and Strategical Railways 

When our troops were defeated by the Japanese in the 
autumn of 1894, the policy of the Powers with respect to 
China was consequently changed. Russia headed the way 
and prepared to play an important part in the Far East by 
the construction of the Trans-Siberian Rartway. _ Long be- 
fore the Chino- Japanese War, Russia had cherished the 
idea of constructing a railroad from the Urals to the 
Pacific coast, 1 with the object of strengthening her strate- 

1 Count Monravieff Amnrski, the Czar's Minister of Foreign Affairs, 
after having annexed the province of Amur to Russia, favored the idea 



2^y] THE STRUGGLE FOR RAILWAY CONCESSIONS 2 g 

gical position and po litical influence in the Far East. 
Russia's first attempt was to seize one of the Korean ports, 
free from the grip of ice, as a terminus, but this attempt 
failed owing to England's objection. 1 In May, 1891. the 
Siberian Railroad was officially started by the Czarevitch, 
now the Czar of Russia, at Vladivostock. The Chino- 
Japanese War had given Russia the opportunity to secure 
an ice-free port in the territory of China. 

Under the terms of the peace treaty of Shimonoseki. 
negotiated with Japan and signed April 17, [895, by Li 
Hung-chang, on behalf of the Manchu Court, Chiiia"was 
compelled to recognize the independence of Korea, and 1 1 
cede to Japan Port Arthur in the Liaotung Peninsula and 
Weihaiwei in the Shantung province in addition to the 
islands of Formosa and the Pescadores. In the Liaotung 
Convention, November 8, 1895, the Mikado's Government, 
under the pressure exerted by Russia, Germany and France 
combined, retroceded Port Arthur and Weihaiwei to China, 
obtaining as compensation a further sum of 30,000,000 taels 
in addition to the original war indemnity of 200,000.000 
taels. The financial difficulties of the Chinese Government 
in paying off the first instalment of the indemnity gave 
opportunities to the foreign Powers to obtain influence in 
the councils of the Manchu Empire. Accordingly, the 
European Powers competed for the privilege of supplying v 
the monetary needs of China. 

The Czar's Minister of Finance, M. de Witte, devised a 

of making an overland road from Russia to the Far East, which was 
set out in Voltaire's letter dispatched to Count Schervorof, dated Fer- 
ney, June 11, 1761. 

1 Before 1885 Russia intended to seize Wensan. In anticipation of 
such action, England, meanwhile, seized Port Hamilton, a Korean 
island. In February, 1887, England evacuated it on the promise of 
Russia that she would not take any Korean territory. 



30 



RAILWAY PROBLEMS IN CHINA 



[258 




7' 



remarkable but infamous scheme of making the Russian 
Government China's guarantor so as to enable China to float 
a loan of 400,000,000 francs at 4 per cent, issued at 94, 
Jn Paris. In return, as compensation for her friendly office, 
Russia made a treaty with China — the Cassini Convention — 
whereby Russia secured the privilege of constructing a rail- 
road across Manchuria to connect her Siberian and Ussuri 
System. This concession marked the beginning of the 
initial struggle for railway concessions in China, which had 
hitherto been pursued somewhat more on political than com- 
mercial lines. This was also the first step toward what has 
been called " Russia's pacific conquest of China." And 
thus the tragic curtain to the " Battle for Concessions " 
was lifted. 

France was not inactive in demanding something for her 
services to China. On June 20, 18957 a treaty with France 
was signed by China, stipulating, besides the extension of 
the frontier between China and Indo-China and the ex- 
ploitation of mines situated in the Province of Yunnan and 
other resources, that the military railways already built be- 
tween Phulangthuong and Langson in Tongking, or other 
railroads to be constructed in Annam might, after a mutual 
understanding, be extended into Chinese territory. In 1897, 
an exchange of notes took place between the French Min- 
ister in Peking and the Tsung-li Yamen x reminding China 
^ of her obligations. 2 

Great-Britain now wanted to act in her turn. On Febru- 
ary 4, 1897, she made a treaty with China, in which, be- 
sides many privileges granted to her. China allowed an im- 

1 The Foreign Office of China, the first of its kind found in the his- 
tory of China, established Jan. 31, 1861. 

2 See Documents Diplomatique s, China; issued by the Ministere des 
Affaires fitrangeres, published by the Paris Imprimeree Nationale ; 
vols, of the years 1894 to 1898. 



2 ~g] THE STRUGGLE FOR RAILWAY CONCESSIONS 31 

portant modification on the Burmese frontier. At the end 
of the same year, China, having been obliged to liquidate 
the Japanese War Indemnity, negotiated a loan with some 
British financial agents. The security of the loan was Jp 
be the native and maritime customs, the salt tax and Likin 
(an internal merchandise tax) . But the British Government 
was not satisfied with this ample and sufficient security and 
demanded certain concessions in addition. These included 
the railway from Burma to Yunnan, a guarantee of the non- 
alienation of the Yangtsze region to any other Power, 
greater freedom of internal trade with the abolition of Likin 
on foreign goods in the treaty ports, and finally the opening 
of Talienwan and Nanning to foreign trade. Russia pro- 
tested against the loan on the ground that the balance of in- 
fluence would be upset thereby, while France objected to the 
Railway clauses and the opening of Nanning. Russia also 
offered an alternative loan on easier terms to China. But 
the British exerted such great pressure upon Peking that the 
Central Government had no way to escape and was forced 
to yield. The loan was finally arranged under Anglo-Ger- 
man auspices with the Likin as security, which was to be 
under the control of the Inspector-General of Maritime 
Customs, an Englishman. At the same time China had to 
grant in recompense all the British demands. 1 — . 

From the above lesson China learned to her great cost 
that the supposed friendly offices of the foreigner might be y / 
just as dangerous to her national honor and integral existj 
ence as his open hostility. 

But China was not yet at the end of her troubles. In 

1 897 when two German priests were murdered by a mob in 
"Shantung, the Kaiser Wilhelm's Admiral without sending an 

ultimatum or any notification to Emperor Kuang-su seized 

1 See British Blue Book, China, no. i, 1899, pp. 12-30. 



$2 RAILWAY PROBLEMS IN CHINA [ 2 6o 

Kiaochow Bay, town and district, and the German Govern- 
ment refused to evacuate until China was hectored into 
agreeing, in a formal convention on March 8, 1898, to com- 
pensation to the families of the murdered missionaries, an 
amount to reimburse Germany for the cost of occupation^ 
the degradation of the Governor of Shantung, the ninety- 
nine years' lease of the country occupied, and the granting 
of mining, railway and exclusive financial privileges 
throughout the whole valuable province where Confucius, 
the Greatest Teacher of China, was born. By virtue of 
this convention Germany obtained the right to build a tri- 
angular railway system in Shantung. German capitalists 
also obtained the right of preference to find capital for any 
scheme for the development of Shantung made by the 
Chinese Government or citizens, and German-made ma- 
terials were guaranteed a preference over all others. 1 

The recognition of the occupation of Kiaochow and the 
concessions of railways and mines to Germany accelerated 
the aggressive actions of the other covetous Powers. Russia 
made a more significant advance from North Manchuria 
and on March 27, 1898, secured a twenty-five years' lease 
of Port Arthur and Talienwan, and compelled the Manchu 
Court to permit the Chinese Eastern Railway Company 2 to 
extend a branch "fine from a certain point (Harbin) on 
the main line to these two ports. 

As Russia, Germany and Great Britain had been granted 
important concessions in the North and the Yangtsze Valley, 
France, in order to balance her political and commercial 
influences in the Far East, occupied in April Kwong- 
chowwan, in the Gulf of Tongking, and secured the right to 

1 Parker (E. H.), " The German Sphere of Influence in China," in 
United Service Maga., 1899, vol. cxli, pp. 172-186. 

2 Cf. infra, p. 52. 



J^A- 



2 6l] THE STRUGGLE FOR RAILWAY CONCESSIONS 33 

construct a railway to Yunnan from the Tongking frontier 
and a promise not to alienate any territory in the three pro- 
vinces of Kwangtung, Kwangsi and Yunnan. 1 

Next, as the balance of power in the Gulf of Pechili was 
materially altered by the surrender of Port Arthur to 
Russia, the Marquis of Salisbury, then head of the British 
Foreign Office, sent a British fleet from Hongkong to the 
Gulf and demanded Weihaiwei from China. In June, 
Kowloon including Alirs Bay was also ceded to England. 
Meanwhile, Japan also demanded the non-alienation of 
Fukien province. 

These disgraceful events in the history of China are 
briefly enumerated here in order to show that the so-called 
" Spheres of Influence," or the " Spheres of Interest " L " 
were roughly established at this stage of the struggle with 
regard especially to the conce ssions of railways. T he policy 
of securing a sphere of influence or of interest was pursued 
without any regard to China's claim to rank as a sovereign 
nation. , 

And thus we see tha^ the four systems of railway,]?', c, 
the Russian system in Manchuria, the German system in 
Shantung, the French system in Yunnan and Kwangsi, and 
the Briti.-di system connecting Burma with Yunnan and 
Szechua nall owe th eir origins to political and strategical 
rather than commercial aspirations. They are singled out 
here that they may not be confused with other roads which 
belong to the second category. 

The Russian, German and French groups were completed. 
They are to all intents and purposes the property of the 
three countries named, with the exception of that of the 

1 See volumes of the years 1898-1901 of the Documents Diploma- 
tique s, China. 

2 For definition of these terms see Reinsch, World Politics (New 
York, 1912), pp. 61 and 113. 



V 



34 RAILWAY PROBLEMS IN CHINA [262 

Germans which may go into the pocket of the Mikado after 
the present World War. China has no control over them. 
Her sovereign rights are encroached upon in all respects. 
How China shall deal with them, or rather how China 
shall get them back, is a question which is serious in char- 
acter and the solution of which depends upon future circum- 
stances and most important of all, upon the material strength 
China will have in the future. 

The British system, however, was only projected and 
surveyed in 1899. Since then no definite agreement has yet 
been reached. Recently several surveys have been made 
but no further work has been done as the mountains and 
valleys all run crosswise to the projected route, which will 
require, consequently, considerable labor in construction. 

Railways granted to Foreign Capitalists 

The railways of the second category were initiated by 
China to an extent and were more or less political in nature 
although financial and commercial considerations were 
taken up seriously. These originated in a very unpleasant 
manner. The disastrous result of the Chino- Japanese 
War was a profound surprise and humiliation to China and 
it had left behind it strong progressive tendencies in the 
bosoms of many of China's patriotic children. JVlany of 
the enlightened officials realized that the want of means of 
rapid transport had prevented China from using efficiently 
her troops stationed in different parts of the country, and 
they grasped the fact that the remedy for the defeat lay 
in the construction of railways. Among them was; Chang. 
Chih-tung, now transferred to take up the Viceroyship of 
Hukuang. Viceroy Chang petitioned the Throne to au- 
thorize the establishment of a company which should raise 
capital in China and undertake the construction of all im- 



263] THE STRUGGLE FOR RAILWAY CONCESSIONS 



63 



portant trunk roads, retaining full control in the hands of 
China. He suggested that the upper section of the trunk 
line running from Lukouchiao to Hankow should be first 
constructed and this section when completed be extended to 
Canton. He further stated that a great trunk line putting 
the metropolis in quick communication with the several 
central and southern provinces was not only commercially 
but strategically necessary. 1 In February, 1896,1a Chinese 
company was formed with a capital fixed at -thirty million 
taels. The failure to raise capital at home, however, fet- 
tered the hands of Chang Chih-tung and his f< TI< >wers and 
ultimately forced the Government to admit foreign capital. 
A Belgian syndicate. La Socictc d'Etudc des Chemins de 
fcr en Chine, appeared in the scene, and, in May ^897, after 
underbidding a group of American financiers and another 
of British capitalists, obtained the contract for the con- 
struction of the line. 2 When it became known that the 
syndicate was assisted at the Peking Court by the ministers 
of Russia and France and also by the influence of the Russo- 
Chinese Bank — this meant to the English and Germans that 
a Russian move to bring Russian influence to the very heart 
of the Yangtsze Valley and Shantung was hidden under 
the Belgian syndicate — the British and German ministers 
protested very violently, basing their remonstrances on the 
" most favored nation " clause of their respective treaties. 
The British Government, which was emphatic in its remon- 
stance and demands, ordered a naval demonstration on the 
China Sea and made the Belgian concession a pretext for 
demanding from China important privileges and railway 
concessions. 

1 See British Blue Book, China Affairs, no. 1 (1899), pp. 87-89 (trans- 
lation). 

2 U. S. Monthly Consular Reports, 1898, vol. lviii, no. 218. 



/ 



36 RAILWAY PROBLEMS IN CHINA [264 

In 11898, Sir Claude MacDonald succeeded in exacting 
from China a string of concessions for the construction 
of various railways in the Yangtsze river basin, in South 
China and in the southwestern part of China, and with the 
co-operation of the Kaiser's minister secured the conces- 
sion of the Tientsin-Chinkiang line. Meanwhile, the 
Peking Syndicate, 1 an Anglo-Italian combination, obtained 
a grant of extensive mining and railway rights in the Pro- 
vince of Shansi and that part of Honan north of the Yellow 
River, while the Russo-Chinese Bank secured a concession 
for a line from Chingtlngfu to Taiyuanfu, the capital city 
of Shansi. The French were also active in the Chinese 
railway extensions, for in September 1899, the official agree- 
ment between China and France for the Lungchow-Xan- 
ning railway was signed in Peking. 

After having experienced various troubles with the for- 
eigners, the Government became anxious for the future of 
the concessions granted, and decided to grant away its rail- 
ways with more carefulness thereafter. On December 13, 
1898, the Tsung-li Yamen, in collaboration with the Board 
of Mines and Railways, 2 memorialized the Throne to the 
effect that " with the exception of the trunk and branch 
lines already arranged for and sanctioned, the construction 
of which will be proceeded with in order, no other lines 
shall be undertaken for the present/' On the same day 
the Imperial holograph Rescript — " Let it be as proposed " 
— was received. The Yamen then transmitted copies of the 

1 The Peking Syndicate was registered in England on March 17, 1897, 
for the purpose of obtaining and developing concessions for mining, 
railway, and other industries in China. 

2 The board was created by the Imperial Edict of Aug. 1, 1898, to 
take charge of railway and mining matters in connection with foreign 
concessions. 

s British Blue Book, Affairs of China, no. 1 (1900), pp. 23-27. 



265] THE STRUGGLE FOR RAILWAY CONCESSIONS $j 

Decree and Memorial to the Diplomatic Corps in Peking for 
their information. This was of course followed by a storm 
of protest from the latter. This time, however, the Gov- 
ernment was able to resist and stuck to its decision. There- 
after the granting of railways to foreigners was stopped for 
a considerable number of years, although various applica- 
tions were made from time to time by different syndicates. 
According to the Memorial the reasons for this sudden 
stoppage of grants of right for railway construction were 
as follows : 

1. Under the circumstances at that time it was necessary 
to discriminate between the urgency of the various proposed 
lines and the order in which they should be built, i. c, to 
undertake trunk lines first and branch lines next. 

2. It was feared that there would be no material funds 
for the repayment of foreign debts, principal and interest, 
or to meet the cost of maintaining the lines. 

At about the same time the Board of Mines and Railways 
drew up a set of " Regulations for Mines and Railways " 1 
governing future enterprises so as to assert control over 
them and encourage Chinese to invest money in them. The 
essentials of the regulations may be summed up as follows : 

1. Railways and mines can be manag ed by officials, by V 
merchants, and by the t wo in combination. 

2. The mines and railways of Manchuria, Shantung and 
Lungchow (in Kwangsi province) are affected by inter- 
national relations and therefore will not be allowed to form 
precedents either for Chinese or foreigners. 

3. Railways and mines must not be worked in combin- V 
ation. In future no more mining rights will be given along 

the routes. Mining companies are allowed, however, to 

1 For full text of the regulations see translation given in U. S. 
Monthly Consular Reports, April, 1899. 

270353 



38 RAILWAY PROBLEMS IN CHINA [ 2 66 

construct branch railways to connect with the nearest water- 
ways. 

4. Only the Government board has the right to grant ap- 
plications for mines and railways. 

5. In the case of Chinese enterprises the companies must 
have a proportion of at least three-tenths of the shares 
owned by Chinese. When this proportion has been raised, 
foreigners may be invited to buy shares; but in borrowing 
foreign money the sanction of the board must first be asked. 
Foreign money-lenders must on the other hand request their 
minister to communicate with the Tsung-li Yamen, asking 
if the company is authorized to borrow. Money lent in 
any other way will be treated as a private loan. Should 
disputes arise between Chinese and foreign merchants, in 
connection with railway and mining enterprises, they must 
be settled by arbitration; the governments concerned will 
not interfere. 

6. All such enterprises will be granted a monopoly for a 
fixed period, the duration of which will be determined by 
the circumstances of the case. 

In addition to the above there are other minor points 
regulated which relate to the sanction of contracts and agree- 
ments, the procedure in regard to the acquiring of lands, the 
provision for a school of instruction by the companies, the 
qualification of promoters, the protection of foreign en- 
gineers and surveyors, rewards to Chinese entrepreneurs, 
the imposing of custom duties on railway traffic and min- 
ing produce, the proportion of profits to be paid to the 
Government, the examination of accounts, etc. 

Later events show, however, that although these regula- 
tions were elaborately drafted and approved by the Govern- 
ment they could not be carried out satisfactorily, especially 
those relating to foreigners. The provisions regarding 
Chinese private enterprises could be enforced only to a cer- 



2 6 7 ] THE STRUGGLE FOR RAILWAY CONCESSIONS 39 



/ 



tain extent. The high proportion of profits which was 
fixed at 40 per cent for railways and 25 per cent for mines 



has done nothing to encourage such enterprises. Late ] 
however, a new set of mining and railway regulations have 
Keen published giving more liberal terms to the private 
entrepreneurs. 

At the time when the regulations for mines and railways 
were issued there were practically no Chinese private mining 
and railway enterprises. Naturally they were regarded by 
the foreigners as restrictions imposed upon them alone. 
Further diplomatic negotiations were carried on demanding 
modifications. To these the Government turned a deaf ear. 
As a matter of fact, up to that time over 6000 miles of rail- 
ways. most of which were on paper, had been granted to the 
foreigners. - The full list of railway concessions to all na- 
tionalities up to November 23,11898, can best be seen in the 
following inclosures attached tba dispatch 1 which was sent 
by Sir MacDonald to Lord Charles Beresford : 



(IX CLOSURE i) 



Nationality 



British 2 .. 
Russian . . 
German 2 . 
Belgian . . 
French. . . 
American 2 



No. 



Total length of line 
represented 



2,800 miles ' 
1,530 

720 

750 

420 

300 



6,420 miles 



1 British Blue Book, " Affairs of China," no. 1 (l PP- 34 W 17- 

2 Half interests are reckoned at half the estimated length. 

3 Including Hankow-Canton and Yunnan- Yangtsze Railways. 

4 Including Manchuria Railway (from Stretensk to Vladivostok). 



4 RAILWAY PROBLEMS IN CHINA [ 2 68 

(Inclosure 2) 

Concessions other than British (up to Nov. 23, 1898) 

RUSSIAN 

(1). The Manchurian Railway Concession dates from 1896. 

The whole length from Stretensk on the main 

Siberian line to Vladivostock is estimated at 1,400 miles, of 
which about 1,000 will pass through Chineses territory. 

The concession is purely strategical. The country traversed, 
though potentially rich, in great part is, and will be for a long 
time, sparsely populated, and the line cannot, in the near future 
at any rate, hope to pay its working expenses. 

(2). The Port Arthur Agreement of March, 1898, arranges 
for the conclusion by Russia of a branch from the above line 
to Port Arthur or Talienwan. The length of the railway will 
be about 400 miles 

(3). The Russo-Chinese Bank has signed a contract for the 
construction of a branch line from Taiyuanfu to connect with 
the Lu-Han trunk lines near Chingting. Length approximately 
130 miles 

FRENCH 

The French possess the right to construct three lines ; but be- 
yond acquiring this right they have done nothing. 

(1). From Tongking up the Red River Valley to Yunnanfu, 
say 290 miles. 

The impression in French railway circles is that a railway 
through Yunnan will not pay expenses, and if any serious at- 
tempt is made to carry out the extension of the Tonquin sys- 
tem, it will be merely as a stepping-stone to Szechuan. Yet 
again, any pretensions that a railway from Yunnan to the 
Yangtsze may have to rank as a commercial project have been 
pronounced against by every traveller in Central China. 

(2). Langson-Lungchow-Nanning Railway. Length, about 
100 miles. (There appears to be an alternative open to the 
French of going to Pese instead of Nanning.) 



269] THE STRUGGLE FOR RAILWAY CONCESSIONS 4I 

(3). From Pakhoi inland, presumably to Nanning. Length, 
say 120 miles. The Tonquin press have pointed out that this 
line will benefit English commerce more than French. It will 
never, in my opinion, be built by the French. 

GERMAN 

(1). Kiao-Chow-Yichow-Tsinan line; length, 420 miles. 
(2). Tientsin-Chinkiang line to be built by an Anglo-German 
Co. (See No. 3, British Concessions.) 

BELGIAN 

The Lu-Han or Peking- Hankow Railway. A Franco-Bel- 
gian Syndicate has secured the Concession for this, a trunk line 
of some 650 or 700 miles passing North and South through 
Chihli, Honan and Hupeh. 

This railway is an old project born of Chang Chih-tung's 
objection to building lines near the coast, " lest they should 
facilitate the access of an enemy." Its prospects as a com- 
mercial enterprise are not considered so good as those of the 
rival Tientsin-Chinkiang line. 

AMERICAN 

The only railway in which America is at present interested 
is the trunk line projected from Hankow to Canton. (See 
British Concession no. 11). 

(Inclosure 3) 
Railway and other Concessions obtained by British Companies 

1. shansi 

The Peking Syndicate has acquired the " sole right to open 
and work coal and iron mines throughout the districts of Yii 
Hsien and Ping Ting Chow, and the Prefectures of Lusan Fu, 
Tsu-chow Fu, and Ping Yang Fu, and also petroleum wherever 
found." 

Under its contracts, the syndicate has also the right to 
" construct branch railways to connect with main lines or 



42 RAILWAY PROBLEMS IN CHINA [270 

with water navigation, to facilitate transport of Shansi coal." 
This has been interpreted officially to include the right of 
connecting the mines with Siang-yang in Hupeh, the near- 
est head of navigation giving access to the Yangtsze. 
This means a railway of 250 miles. 

II. HONAN 

The Peking Syndicate has also acquired rights similar to 
those obtained in Shansi in that part of Honan north of the 
Yellow River. 

III. CHIHLI 

The Hongkong and Shanghai Bank are financing and con- 
trolling the North China railways from Peking to Tientsin, and 
thence to Shanhaikwan and Newchwang. The total length of 
these is about 500 miles, of which 300 miles are completely 
open to traffic. 

IV. NORTH CHINA 

The bank has also acquired a half-interest in the coal mines 
at Nan P'iao, in the Ch'ao-yang district. According to ex- 
perts, these mines possess the best and richest coal seams in 
North China, and they have the immense advantage of being 
close to a line of railway and the sea. 

V. CHIHLI AND KIANGSU 

The Tsung-li Yamen have undertaken officially that the 
construction of the Tientsin-Chinkiang line shall be intrusted 
to an Anglo-German Syndicate. The British portion of this 
Syndicate is represented in China by Messrs. Jardine, Mathe- 
son, & Co., and the Hongkong and Shanghai Bank. This will 
be a trunk line of 600 miles passing through more populous 
country than the Lu-Han Railway (the Belgian line), with 
which it is certain to be able to compete. 

VI. KIANGSU 

A British Syndicate, represented by Messrs. Jardine, Mathe- 
son, & Co., and the Hongkong and Shanghai Bank, has ob- 



2 ji] THE STRUGGLE FOR RAILWAY CONCESSIONS 43 

tained the concession to finance and construct the Shanghai- 
Nanking Railway. There is no more paying district than this 
for a railway in China. The length of the line will be 170 
or 180 miles. 

VII. KIANGSUj AXI1UI, AND EONAN 

The same syndicate has the right to extend the Shanghai- 
Nanking Railway from Pukow opposite Nanking to Hsin Vang, 
in Honan, a distance of 270 miles. 

VIII. KIAXG5U AXD CHEKIANG 

The same syndicate has the right to construct a line from 
Soochow to Hangchow with possible extension to Ningpo. 
This line will run through a very populous district for over 
200 miles. 

The last three concessions all lie within the Yangtsze region. 

IX. PROVIXCE OF CHEKIAXG 

The Peking Syndicate has also obtained mining concessions 
similar to the Shansi and Honan in this province. 

X. KWANGTUNG 

The Jardine Syndicate has the right to construct a railway 
from Kowloon to Canton. The length of this line will be 
nearly 100 miles. 

XI. HUPEH, KIAXGSI, AXD KWAXGTUNG 

An American Syndicate signed a preliminary agreement for 
the construction of a railway from Hankow to Canton in .Maw 
1897. Negotiations are now in progress for the amalgamation 
of this concession with the Kowloon-Canton line, and the 
working of the whole line from Hankow to Canton by an 
Anglo-American Company. This will be a trunk line, ap- 
proximately 600 miles long. 

XII. YUNNAN, KWHU HOW, AND SZECHUAN 

The right to extend the Burmah system into China as far as 
the Yangtsze is admitted, and surveys are now in progress. 



44 RAILWAY PROBLEMS IN CHINA [272 

This involves a possible railway of 700 miles. (See Remarks 
on French Concessions.) 

The number of miles and some of the routes relating to 
the above railway concessions were only roughly estimated 
and plotted and may be subsequently, as we shall see later, 
subject to changes. Notwithstanding, most of these con- 
cessions have been realized one after another. 

Up to the middle part of the year 1900 the Russian, 
French, Belgian, and American syndicates pushed on in 
surveying or in constructing their respective roads with 
considerable vigor and energy. The British concession- 
aires, however, were very inactive and backward in carry- 
ing out the work on their concessions, most of which were 
only in preliminary arrangement and by no means promis- 
ing of anything definite. This was first due to the political 
intrigues which had influenced the Government to oppose 
British enterprises and support the Franco-Belgian group 
of capitalists backed by Russian diplomacy, and secondly 
due to the outbreak of the Boer War which had made it 
for a time impossible to raise capital in the London money 
market to finance projects. 

The securing of concessions for building railroads and 
working mines by foreign syndicates supported by their re- 
spective governments or by the combination of several gov- 
ernments, the energetic but dangerous action exhibited by 
the aggressive foreign ministries and navy and army cliques 
in robbing territories and seizing political and commercial 
privileges, and the subsidizing of China by foreign capital 
stirred up_,5H_anti- foreign feeling among the people. 
In June, 1900, the Boxer movement originating in the 
Province of Shantung, burst over North China. Its results 
were the further humiliation of China and the retardation 
of the constructional work on railways. After the Boxer 



273] THE STR UGGLE FOR RAILWAY CONCESSIONS 4 - 

trouble construction of railways was, nevertheless, pushed 
on with greater rapidity than ever before. After this con- 
vulsion China began to lead a new life and to look forward 
towards finding some means for her reform and salvation. 

Railway Spheres of Interest 

So far we have studied only one view of the " Battle for 
Concessions," i. e., how the European Powers have treated 
China and what they have squeezed out of her, especially 
with respect to railway concessions. Now we come to an- 
other aspect of the battle, i. c., how the European Powers 
came from time to time into conflict with one another in 
dividing their spoils exacted from China. It is instructive 
and interesting to note the understandings and arrangements 
made among the foreign governments and concessionaires 
as to their respective spheres of activity with regard to the 
construction and financing of railways in China. 

i. England and France. Our attention is first attracted 
by the Anglo-French Siam Convention of 1896, respecting 
the ex ploitation of Szechuan and Yunnan. By this Con- 
vention the two nations pledged each other to enjoy in com- 
mon all the privileges and advantages of any nature con- 
ceded to either nation within these provinces. This agree- 
ment is looked upon as a temporary modus vivendi, lie- 
cause when a French syndicate obtains concessions in 
Yunnan or Szechuan they usually add these provinces to 
their sphere of interest, and similarly with the British. The 
emphatic denouncement 1 of the French pretensions by Sir 
MacDonald tells us the truth. A similar situation was 
created in the province of Kwangtung. As the Govern- 
ment lacks power to declare its intention to exclude the in- 
terference of the one in favor of the other, international 
complications are to be feared in case any cause of friction 

1 Cf. supra, p. 40. 



4 6 RAILWAY PROBLEMS IN CHINA [274 

is created, especially when remembering the tremendous 
interests at issue between the two nations in these provinces. 

2. England and Germany. Another international ar- 
rangement was that which developed out of the apportion- 
ment of the Tientsin-Pukow line. In August, 1898, Mr. 
Yung Wing (educated in the United States), who had been 
granted the right to form a company to construct this road, 
signed a contract with an Anglo-American Syndicate for a 
loan of 5,000,000 pounds sterling. 1 As the Germans have 
secured railway rights in Shantung the German minister in 
Peking applied for the grant of this concession. Because 
of the German influence in Shantung and the indefinite 
nature of Mr. Yung Wing's right the syndicate subsequently 
withdrew from the field. But as the line was in part to 
traverse the Yangtsze Valley, the British and Chinese Cor- 
poration was also interested in it. The suggestion was then 
made that the enterprise should be taken up by both British 
and German capitalists acting jointly. The two govern- 
ments concerned favored this idea and sanctioned the pro- 
posal. A working arrangement was immediately formu- 
lated for the financing and construction of the line, in which 
Great Britain would take up that part from the southern 
boundary of Shantung to the terminus at Chinkiang (later 
changed to Pukow, a point opposite Nanking, the terminus 
of the Shanghai-Nanking Railway project), and Germany 
would share to the extent of such part of the line as tra- 
versed her sphere of influence. 

In the meantime Russian influence was becoming pre- 
dominant over North China and threatening the interests 
of the two nations. The situation was such that it re- 
quired a more complete understanding between England 
and Germany and a strengthening of their common purpose 

1 U. S. Monthly Consular Reports, 1898, vol. lvii, pp. 585-587. 



27 -] THE STRUGGLE FOR RAILWAY CONCESSIOXS 4 j 

to prevent further encroachment by Russia upon the center 
of China. Consequently the capitalists of the two countries 
arrived at an agreement in regard to their respective rail- 
way spheres in China. The British financiers agreed to 
confine their activities to the Yangtsze Valley, while the 
Germans retained the valley of the Yellow River and the 
Province of Shantung. The arrangement has important 
international consequences, as it has checkmated the Russian 
advance from the North and created a German sphere of 
railway interest which has served as a wedge between those 
•of the British and the Russians — a wedge which has pre- 
vented much friction between Great Britain and Russia. 
The agreement, 1 proposed by Herr M. A. von Hanseman 
representing the German Official Syndicate with regard to 
the railway spheres of interest for applications for railway 
concessions in China, which was accepted by the British and 
Chinese Corporation and the Hongkong and Shanghai Bank- 
ing Corporation and sanctioned by their respective govern- 
ments, is understood to be as follows : 

It is desirable for the British and German Governments to 
agree about the sphere of interest of the two countries regard- 
ing the railway constructions in China, and to mutually sup- 
port the interests of either country. 

i. British sphere of interest, vis. — The Yangtsze Valley, 
subject to the~connection of the Shantung lines to the Yangtsze 
at Chinkiang ; the provinces south of the Yangtsze ; the prov- 
ince of Shansi with connection to the Peking-Hankow line at 
a point south of Chengting and a connecting line to the Yang- 
tsze Valley, crossing the Hoangho Valley. 

2. German sphere of interest, via. — The province of Shan- 
tung and the Hoangho Valley with connection to Tientsin and 

1 British and German Agreement re Railway Construction in China, 
Minutes of Meeting held at New Court, St. Swithcn's Lane, London, 
on the ist and 2nd Sept., 1898. 



4 8 RAILWAY PROBLEMS IN CHINA [ 2 /6 

Chengting, or other point of the Peking-Hankow line, in the 
south with connection to the Yangtsze at Chinkiang or Nan- 
king. The Hoangho Valley is understood to be subject to the 
connecting lines in Shansi forming part of the British sphere 
of interest, and to the connecting line to the Yangtsze Valley, 
also belonging to the said sphere of interest. 

3. England and Russia. In the winter of 1898 when the 
Chinese Imperial Railway Administration concluded with 
the British and Chinese Corporation the Shanhaikwan Ex- 
tension Railway Loan of 2,300,000 pounds sterling, the 
Russian government raised serious objections to the Loan 
Contract while the British Government of course upheld it. 
This was followed by a storm of violent protests ; and long 
negotiations were conducted between London and St. Peters- 
burg (Petrograd). On April 29, 1899, notes were ex- 
changed and signed by the British Ambassador at Petro- 
grad and the Russian Minister for Foreign Affairs, record- 
ing the Agreement 1 arrived at in regard to railways in 
China. The arrangement was, in substance, as follows : 

1. Russia engages not to seek for herself or on behalf of 
Russian subjects other railway concessions in the Yangtsze 
Basin, and not to place obstacles either directly or indirectly in 
the way of railway enterprises in that region supported by the 
British Government. 

2. Similar engagement, mutatis mutandis, by Great Britain 
north of the Great Wall. 

A supplementary note, which reflects at once more clearly 
the real nature and demarcation of the spheres of interest 
of the two nations was exchanged at the same time, respect- 
ing the Shanhaikwan-Newchwang extension and the branch 
line from Siaocheichau (north of Shanhaikwan) to Hsin- 
mintun, which reads in part as follows : 

1 British Blue Book, China, no. 2 (1899), p. 87, et seq. 



2 yy] THE STRUGGLE FOR RAILWAY CONCESSIONS 49 

The general arrangement established is 

not to infringe in any way the rights acquired under the said 
Loan Contract, and the Chinese Government may appoint both 
an English engineer and a European accountant to supervise 
the construction of the line in question and the expenditure of 
the money appropriated to it. 

But it remains understood that this fact cannot be taken as 
constituting a right of property or foreign control, and that 
the line in question is to remain a Chinese line under control of 
the Chinese Government, and cannot be mortgaged or alienated 
to a non-Chinese Company. 

As regards the branch line from Siaoheichau to Hsinmintun, 
in addition to the aforesaid restrictions, it has been agreed 
that it is to be constructed by China herself, who may permit 
European (not necessarily British) engineers to periodically in- 
spect it, and verify and certify that the work is being properly 
done. 

The present agreement is, naturally, not to interfere in any 
way with the right of the Russian Government, if it thinks fit, to 
support applications of Russian subjects or establishments for 
concessions for railways which, starting from the main Man- 
churian line in a southwestern direction, would traverse the 
region in which the Chinese line, terminating at Hsinmintun 
and Newchwang, is to be constructed. 

Besides the above mentioned nations there were several 
others taking great interest in railway matters in China. 
Among them were the United States and Italy. From the 
very beginning the United States has pursued a very right- 
eous course in dealing with China. She always main- 
tained fair play which has been greatly appreciated by 
China. Her "open door" policy, made known through 
her wise Secretary of State, Mr. Hay, has saved China 
from serious humiliation. Even during the stormy period 
of the Battle for Concessions China had great confidence in 
her. This can be proved in the case of the Canton-Hankow 



5 RAILWAY PROBLEMS IN CHINA [278 

concession, which the Chinese Government intrusted to 
the American syndicate, with full power to control the ex- 
penditure of loan funds and the management of the road, 
while, on the contrary, she held these to herself in the case 
of the Belgian concession for the Peking-Hankow road. 1 

At the beginning of 1899, Italy endeavored to secure 
a place in China. She selected as her field of exploitation 
the Province of Chekiang. Although she had England's 
support, her effort was a failure. This was due to two 
reasons: First, Peking did not look upon her with favor; 
secondly, the popular opposition of the Italians in those 
days to an expansionist policy changed the mind of 
their government. Italy now adopts the policy of only 
utilizing the commercial opportunities in China. 

Bel^iumjias, no doubt, taken up a very prominent posi- 
tion in the Chinese railway circles; but she has no special 
policy, except to find new markets for the products of her 
great iron industries, and at the same time to create a pro- 
fitable financial business. She has, however, to attach her- 
self to France and Russia to accomplish her desire. 

This was the general situation, and the above were the 
general arrangements concluded between the leading Powers 
in China just before the close of the last century. At the 
dawn of this century when Japan succeeded in claiming her 
ascendancy over Far Eastern affairs a new character was 
added to the list of the players in the Chinese railway 
drama. We will study this very character in the following 
period of railway development in China. 

It is understood that the above international arrangements 
can not be and will never be perpetually maintained. There 
are many forces, political, financial, or otherwise, working 
constantly to upset them. We shall see later that the Russian, 
the German and even the British spheres of interest have 

1 Cf. infra, pp. 74-78. 



279] THE STR UGG LE FOR RAILWAY CONCESSIONS 5I 

already been changed or modified one after the other, not 
only by outsiders and new forces but also by the very nations 
who concluded these arrangements. In fact, France has 
been engaged in a great effort to join hands with Russia 
across the British sphere of influence. However, such an 
action, like other undermining forces, can not affect Great 
Britain seriously for she has pursued the wisest course in 
China — the course of the " open door " and equal commer- 
cial opportunity. Great Britain was chiefly interested in 
the trade of the Yangtsze Valley. Her effort has been 
mostly directed towards preserving the freedom of trade 
unhampered by foreign interference, except occasionally 
when the situation was such that she had to act in a some- 
what awkward manner. 

On the other hand, the course taken by Russia and Ger- 
many has been tested and is found an utter failure. The 
rapid changing of hands of their interests in South Man- 
churia and Shantung teaches these foreigners a lesson that 
selfishness can never succeed. Nay, injuries brought upon 
the wrong-doers themselves have resulted from their cher- 
ishing the ambition of territorial expansion and national 
imperialism. In order to accomplish that ambition various 
wonderful schemes and clever intrigues have been applied 
for the purpose of securing exclusive privileges from a help- 
less country. At the time of the Battle for Concessions who 
knew that what they had gotten from China was to be lost ? 
Nay, more than that, they have lost their own energy and 
money in addition to the loss of their game. It remains 
to be seen who will ultimately be benefited. 

Turning now from politics to the consideration of the 
railway status, we are in a position to note what has been 
actually accomplished by the concessionaires. The railways 
described below are those the construction of which was 
either completed or started within the second period of rail- 
way development in China. 



CHAPTER IV 

The Foreign Railroads 

The Chinese Eastern Railway 

On September 8, 1896, &n agreement was signed between 
the Chinese and the Russian Governments regarding the 
construction of this line. Under this agreement th eRusso- 
Chinese Bank, a semi-official institution incorporated to pro- 
mote Russian interests in the Far East, acquired the right to 
form a company called the Chinese Eastern Railway Cc^to^ 
construct a railway across Manchuria forming part of the 
through line from Europe to Vladivostock. The company 
was organized with a capital of 5,000,000 roubles, nominal 
credit, which was divided into 1,000 shares at 5,000 roubles, 
nominal credit. The statutes of the company were drawn 
up by the chief promoter, M. de Witte, and formulated by 
the Russo-Chinese Bank. 1 

According to the statutes, which were approved by the 
Russian Government on December 4-16, 1896, the share- 
holders of the company may be only Chinese and Russians. 
The concession shall lapse at the end of eighty years from 
the day of opening of traffic along the whole line. The 
Russian Government guarantees the revenue of the line for 
covering working expenses, as well as for effecting the obli- 

1 Chinese Eastern Railway Agreement and Statutes, see Chung Hwa 
Fa Kwei Tax Tsueuen (Complete Set of Rules, Regulations, Treaties, 
etc. of the Repuhlic of China), (Shanghai, 1913), treaties, vol. xi, 
leaves 30 et seq. The statutes (in English), translated partly, see 
British Blue Book, China, no. 1 (1900), PP- 57-6i. 

52 [280 



2 gl] THE FOREIGN RAILROADS 53 

gatory payments on bonds. Bonds can be issued only on de- 
mand, and only with the consent of the Russian Minister 
of Finance. The Russian Government also guarantees pay- 
ment of the interest and the amortization of the bonds, and 
reserves to itself the right to appropriate the bond loan 
at a price which shall be determined between the company 
and the bank, and to pay to the company the agreed amount 
in ready money. The company is managed by, a Board of 
Management of nine members elected by the shareholders, 
and a Chairman appointed by the Chinese Government. The 
Yice-Chairman is chosen by the members of the Board from 
among themselves. The chief duty of the Chairman is to 
keep watch over the interests of the Chinese Government. 
The Vice-Chairman is supposed to interest himself ex- 
clusively in the management of the company. The Russian 
Government has a right to superintend the progress and 
development of the works, during the period both of con- 
struction and of exploitation. The Russian Minister of 
Finance has, moreover, the right to ratify the nominations 
of the Vice-Chairman, the Chief Engineer, and all other 
officials. On the expiration of thirty-six years from the 
time of completion of the whole line, the Chinese Govern- 
ment has the right to acquire the line by refunding to the 
company in full all the outlays made on it by making pay- 
ment for everything, such payments to be made with ac- 
crued interest. 

In addition to the above there are other regulations con- 
cerning the transport of troops, the control of properties 
near the line, the discrimination of tariff, etc. All the 
terms stipulated in the agreement prove the preponderating 
Russian influence in the enterprise. It must be borne in 
mind that the majority of the shares are in the hands of the 
Russian Government. 

It is therefore evident that the Chairman, appointed by 



54 RAILWAY PROBLEMS IN CHINA [282 

China, is simply a figurehead, and that the whole road is ex- 
clusively Russian. Throughout all the statutes of the agree- 
ment the only important reservation made in the interest of 
China is the right of repurchase of the road on the expir- 
ation of thirty-six years from the date of its opening for 
traffic and on the assumption of the responsibilities of the 
said company. 

After all arrangements were settled the Russian Govern- 
ment was very prompt in carrying out the construction of 
the road, more on account of the important political con- 
sideration at that time than because of the shortening of the 
route. The Trans-Siberian Railroad as originally pro- 
jected was entirely within Russian territory and followed the 
bank of the Amur River from Stetinsk to the Ussuri — a 
wide useless detour. When Russia secured this conces- 
sion the section on the north bank of the Amur River 
was abandoned for a Trans-Manchurian Railroad which 
leaves a station near Chita and enters Manchuria at Man- 
chouli to rejoin the original line at Nikolskoli, about 67 
miles from Vladivostock — thus shortening the distance by 
about 500 miles. The line running across Manchuria to- 
wards Vladivostock covers a distance of about 960 miles 
in Chinese territory. In the Spring of TSgyJ\vovk of con- 
struction was started and in the same year the city of 
Harbin was founded and made the headquarters of con- 
struction. This was the first step toward what has been 
called Russia's " pacific conquest " of China. 

But it was merely preparatory to a more significant and 
more ambitious advance. When the Germans stepped on 
Shantung and seized Kiaochow Bay from China, Russia 
secured a twenty-five-year lease of Port Arthur and 
Talienwan and a permit to extend a branch line of five- 
foot gauge, from Harbin on the main line to Talienwan, 
subject to the same conditions as stipulated in the September 



2 gi] THE FOREIGN RAILROADS 55 

8, 1896, Agreement between the Russo-Chinese Bank and 
the Chinese Government. The eighth clause of the Agree- 
ment x (March 27, 1898) concerning the lease of the Liao- 
tung Peninsula issued for this branch line reads : 

The Chinese Government agrees that the principle of the 
permission given in the 22d year of Kuang-su (1896) to the 
Manchurian Railway Co. for the construction of a railway 
shall now from the date of signature be extended to the con- 
struction of a branch line from a certain station in the afore- 
said main line to Talienwan, or if necessity requires, 

to a convenient point on the sea coast in the 

Liaotung Peninsula between Yingtsu (Newchwang) and the 
Yalu River. The provisions of the agreement of the 8th of 
September, 1896, between the Chinese Government and the 
Russo-Chinese Bank, shall be strictly observed with regard to 
the branch line above mentioned. 

The construction of the whole system was pushed on very 
rapidly. In the fall of (1 901 \the entire Chinese Eastern 
Railway connectingjhejljan^- Siberian line with Yladi- 
vostock across Manchuria and the line south from Harbin 
to Port Arthur were completed. This system in Man- 
churia in all measured about 1,600 miles. The estimated 
cost of construction of the whole system was about Rbs. 
422,292,547. After the Russo-Japanese War the South- 
ern section of the railway from kuangchengtze to Dairen 
(Japanese spelling of Talien) was surrendered to Japan. 
The Chinese Eastern Railway system, as it now stands, 
has a total mileage of only 1,078 miles; the Manchouli 
(via Harbin) to Suefenho (Pagronitchnaia) section forms 
the Manchurian section of the Trans-Siberian Railway with 
a branch to Kuangchengtze. 

3 Chung Hwa Fa Kwei Tai Tsucucn, treaties, vol. xi, leaves 32-35- 



56 RAILWAY PROBLEMS IN CHINA [284 

The Shantung Railway System 

When Germany secured in Kiaochow a strategical and 
political position a railway convention was concluded at the 
same time with the signing of the Kiaochow lease whereby 
the right to construct a triangular system of railways in 
Shantung was also secured. The base of the triangle was 
to be a line running south-westward from Kiaochow to 
Ichowfu; one side was to proceed from Ichowfu to 
Tsinanf u, which would be the apex ; and the other side was 
to connect Tsinanfu with Tsingtao. Although it was stipu- 
lated in the railway agreement 1 that a Sino-German Co. 
was to be formed and that the people or Government of 
China were at liberty to invest money if they chose and 
appoint directors for the management of the enterprise, 
the merchants, investors and Government of China did not 
take the risk of purchasing shares because of the political 
conditions of the country at that time. So the railway, now 
in operation, was practically financed and constructed by 
the Germans entirely. The Germans also secured the right 
" to hold and develop mining property for a distance of 
thirty li (9 miles) from each side of these railways and 
along the whole extent of the lines.'' It was provided in the 
same agreement as follows : 

If at any time the Chinese should form schemes for the de- 
velopment of Shantung, for the execution of which it is neces- 
sary to obtain foreign capital, the Chinese Government, or what- 
ever Chinese may be interested in such schemes, shall, in the 
first instance, apply to German capitalists. Application shall 
also be made to German manufacturers for the necessary ma- 
chinery and materials before the manufacturers of any other 
power are approached. Should German capitalists or manu- 
facturers decline to take up the business the Chinese shall then 

1 Chung Hzva Fa Kzvci Tai Tsucuen, treaties, vol. iv, leaves 18-20. 



2S5] THE FOREIGN RAILROADS 57 

be at liberty to obtain money and materials from sources of 
other nationality than German. 

The acquisition of these rights aroused keen enthusiasm 
in Germany. The Reichstag appropriated 8,500,000 marks 
for the development of the port of Tsingtao. Various 
syndicates in Germany competed for the concession from 
the government to c onstruct the railways in the Province 
of Shantung! TrT June (1899 the " Schantung Eisenbahn 
Gesellschaft " (Shantung Railway Co.) was organized by 
the prominent competitors at Berlin with a capital of 54,- 
000,000 marks. By its concession the syndicate secured the 
following rights : ( 1 ) The right to build a line from Tsing- 
tau to Kiaochow and from the latter point via Wehsien to 
Tsinanfu together with a branch line to Poshan, within a 
period of five years. (2) The syndicate was given an option 
to construct a line, until the end of 1908, from Kiaochow 
to Ichowfu and another connecting Tsinanfu and Ichowfu. 
(3). The syndicate secured the exclusive right for a period 
of five years of searching for minerals and petroleum with- 
in a zone of thirty li along both sides of the railways and 
of applying for claims in respect of them. 

In consideration of this concession the syndicate agreed 
to turn over to the German Government a part of the surplus 
profits after paying a dividend of five per cent. 

On March 21, 1900, a set of regulations 1 for the Kiao- 
chow and Tsinanfu Railway was drawn up and signed by 
the representatives of the Chinese Government and the 
Sino-German Co.. for the purposes of facilitating the con- 
struction work, of protecting the railway, of defining more 
clearly the scope of the company's activity and the nature 
of the concession, etc. Article 17 of the Regulations 
stipulated in these words : " The object of constructing this 

1 Chung Hwa Fa Kwei Tai Tsucuen, treaties, vol. xii, leaves 8-12. 



58 RAILWAY PROBLEMS IN CHINA [ 2 86 

line is solely the development of commerce, and it will not 
be permissible to transport foreign soldiers, munitions used 
by foreign soldiers or anything which is injurious to China. 
If this rule is violated the offender or offenders will be 
punished according to the Laws of the Maritime Customs." 
And in Art. 28, it was agreed that the provincial govern- 
ment of Shantung shall have the right to buy back this line 
yf after twenty years by paying four-fifths of the original cost 
of the machinery, rails and all other equipment of the road. J 

The construction of the main line from Tsingtau to 
Tsinan was completed in 1904, a distance of 240 miles. It 
is standard gauge of 4' 83/2 " laid on iron sleepers, and has 
a branch line to the Poshan mines of 34 miles, making, in 
all, 274 miles. The proposed line between Ichowfu and 
Tsinanfu was abandoned in favor of the Anglo-German 
Syndicate in connection with the construction of the 
Tientsin-Pukow line. In regard to the line from Kiaochow 
to Ichowfu the preliminary surveys have been made, but 
further work has been abandoned. 

The Yunnan Railway 
By the Convention x of April, 1898, the Chinese Govern- 
ment granted to the French Government or the company 
chosen by the latter, the right to construct a railway from 
the frontier of Tongking to Yunnan fu. On December 25, 
1898, the French Chamber of Deputies passed a law au- 
thorizing the Government of Indo-China to grant a guaran- 
tee of interest to the company which might become the guar- 
antees of this line. The governor-general of Indo-China, 
confirming this law, signed, on June 15, 1901, with a syndi- 
cate of the principal financial houses of Paris, a convention 2 

1 Documents Diplomatiqaes, China, 1894-1898, pp. 45-50. 

2 Report of Cie. Frangaise des Chemins de fer de L'Indo-Chine et du 
Yunnan et Societe de Construction de Chemins de fer Indo-Chinois, 
pp. 10-12. (Paris, 1910.) 



2 gj] THE FOREIGN RAILROADS 59 

(ratified by a law of July 5, 1901) for the building- of the 
railway from Laokay to Yunnanfu and for the working of 
the whole line from Haiphon to Yunnanfu. It was stipu- 
lated in the latter convention that the syndicate had to 
organize, within three months from the date of the passage 
of the law approving this convention, a stock company with 
a capital of 12,500,000 francs, to work the line from 
Haiphon to Laokay which was to be built by the govern- 
ment of Indo-China, and for the purpose, also, of building 
and working the railway from Laokay to Yunnanfu. It 
was also stipulated that the company would receive from 
the colony a subvention of 12.500,000 francs and also a 
guarantee of not more than three millions of francs payable 
yearly during 75 years, which was to be additionally guaran- 
teed by the home government, for the bonds which it should 
have issued for the purpose of building the railroad. The 
annuity will produce a capital sum of 76,000,000 francs in 
75 years. Thus the total capital estimated at the start was 
101,000,000 francs. 

Immediately following this convention the Compagnie 
frangaise dcs Chemins de fcr de V Indo-Chine et du Yunnan 
was organized and bonds were issued. For the purpose of 
building the line from Laokay to Yunnanfu, this company, 
in its turn, intrusted the work to the Societe de Construction 
dcs Chemins de fcr Indo-Chine, which was formed by the 
consolidation of the Regie generate dcs Chemins de fcr and 
the Societe de Construction dcs Batignolles. 1 

In the autumn of 1903, when the conditions under which 
the extension of the line was to be made on the territory 
of China became justified, the French minister in Peking 
negotiated with the Government the final agreement. 2 The 

1 Ibid., pp. 12-15. 

2 Chung Hwa Fa Kwei Tat Tsueuen, treaties, vol. iii, leaves 41-48. 



60 RAILWAY PROBLEMS IN CHINA [ 2 88 

principal provisions regarding the statutes of the railroad 
are, in substance, the following: 

The Chinese Government has no further obligation than to 
surrender the necessary land for the line and its dependencies. 
The gauge of the line is to be one meter. Once the line be 
completed, and if the parties concerned deem it expedient, 
after an understanding has been arrived at between the high 
provincial authorities on the one side and the French minister 
and the Waipupu on the other, as to the mode of procedure, 
branch lines connecting with the main line may be constructed. 
All supplies, machinery and materials necessary for the con- 
struction and exploitation of the railroad shall be exempted 
from Import Duty. In case of war with other nations and the 
railroad not maintaining its neutrality, China may take over 
the line and operate it, if she thinks fit. On the expiration of 
eighteen years after the date of signing the agreement the 
Chinese Government has the right to get back the land granted 
and to repurchase the line from the French Government after 
the payment of all expenses put into the railroad, including 
stocks, interest and principal of bonds and all properties in 
connection with the railroad. 

The line was constructed by France with French capital 

without guarantee from the Chinese Government. The 

duration of the concession is to be eighty years, as in the 

- case of the Manchurian Railway Concession; and on the 

expiration of that period the railway shall revert to China. 

When the construction work began on the Yunnan sec- 
tion of the line there were various engineering and other 
technical difficulties which had to be overcome. The enor- 
mous expenditure required to construct the railroad through 
the Nanting Valley, and the extraordinary amount of tun- 
neling, bridging, cutting and filling consumed all the ori- 
ginal funds of the concessionaire company, which col- 
lapsed in 1 90S. In 1909, the French Foreign Affairs 



289] THE FOREIGX RAILROADS 6 1 

Committee presented its report upon the bill — which, pro- 
viding for the supply of sufficient funds to complete the 
work, was passed through the Chamber of Deputies at the 
end of 1908 — authorizing the government of French Indo- 
China to raise a loan of 53,000,000 francs in order to meet 
the expenditure charged to the budget of that dependency 
in connection with the building of the Yunnan Railway. 
The loan is guaranteed by the home government, bearing 
interest at 4 per cent, and is redeemable in 65 years. 

With the fund realized from the above loan the Laokay- 
Yunnan line was completed and opened to traffic in April, 
191 o. Its commercial prospect, according to recent re- 
ports, is not very bright. 

In consequence of the financial and other vicissitudes of 
the enterprise and various alterations in the plans, the initial 
cost of the whole line from the sea to Yunnanfu amounts to 
about Fes. 165,000,000 as compared with the original esti- 
mate of Fes. 101,000,000. The capital of the Compagnie 
frangaise des Chemins de fer de Vlndo-Chine et du Yunnan 
was raised to Fes. 17,500,000. Bonds amounting to Fes. 
10,488,962 have been issued by the company. 



CHAPTER V 
Railways Built with Foreign Capital 

it 

Before the outbreak of the Russo-Japanese War prac- 
tically all railways in China were built with foreign loans. 
Owing to the unsettled conditions of affairs in China in 
those days and the ignorance of the authorities about rail- 
way matters, exceptional powers and privileges were granted 
to the foreign bankers who, thereby, retained full control 
over the loan funds. As the foreign governments, who 
have endeavored to acquire fresh fields for colonization or 
to create preferential markets for their merchants, have ex- 
acted from China promises of different kinds for the rights 
of way for railway construction, the conclusion of loan 
agreements has been usually accomplished after much 
troublesome diplomatic negotiations. Therefore, a foreign 
loan negotiation was regarded more as a political issue than 
as a commercial transaction. Although nominally the loan 
agreements were made between the Chinese Government 
and the various syndicates which were supposed to be 
private organizations, they were taken more as " treaties " 
between the Chinese Government and the different foreign 

governments than as honest business contracts be.tw.eerL.twQ 

parties. Under such conditions, it can readily be seen, 
v /(the result was that unfavorable^and even notorious terms 
Were stipulated in the agreements. ! 

The loan agreements concluded before 1905 were more 
or less similar in principle to the Shanhaikwan Extension 
Railway loan (sometimes called Peking-Newchwang Rail- 
62 [290 



291] RAILWAYS BUILT WITH FOREIGN CAPITAL 63 

way Loan) Agreement, 1 the preliminary draft of which was 
signed on June 7, 1898, when the Government contracted 
with the Hongkong and Shanghai Banking Corporation a 
loan for the Imperial Railways of North China. The de- 
finitive agreement for the same loan was signed on Decem- 
ber 10, 1898. Under this agreement a precedent was cre- 
ated, the effect of which is well described by the editor 
and proprietor, Mr. Geo. Bronson Rea, of the Far Eastern 
Review, in the following words : 2 

China voluntarily admitted the principle that her officials 
were incompetent to honestly administer the proceeds of a for- 
eign loan to the satisfaction of the investor. And having once 
placed her financial probity in question, she has been forced 
through successive similar agreements to follow a practice 
which no other nation in the world tolerates for an instant. 
Through all subsequent loan negotiations China has been made 
to feel the mortification of the foreign assumption that al- 
though her security is good her integrity is rotten 

In short, while China could give ample se- 
curity and pay good interest, she could not be trusted with the 
expenditure of the money. And under the provisions of loan 
agreements based on these principles, China has been deprived 
of authority in her own affairs, and the national commercial 
and political interests of money lenders advanced coming into 
direct conflict with the Open Door Doctrine. 

Under this agreement and several others which were 
concluded at about the same time and prior to the Boxer 
outbreak of 1900, the bankers have secured not only the 
" control " over the loan funds but also the management 
of the railways during and after construction. 

1 Cf. supra, p. 48. For Chinese text of Agreement see Chung Hzva 
Fa Kwei Tai Tsueuen, treaties, vol. xi, leaves 1-5. For English text 
see Kent, Railway Enterprise in China (London, 1907), Appendix C. 

2 The Far Eastern Review (Shanghai, China), vol. vi, no. 6, p. 215. 



64 RAILWAY PROBLEMS IN CHINA [292 

The provisions embodied in these agreements were prac- 
tically similar in principle. Besides securing a first mort- 
gage on the railroad whose construction they financed, the 
bankers were entitled to a share in the profits of the line, 
in the management of which they usually obtained for their 
chief engineer powers superior to the Chinese Administra- 
tor-General or Managing Director. They obtained also 
facilities and privileges which assured them that the loan 
funds should be so expended that the mortgaged property 
would constitute a sufficient security. In addition to the 
share in the surplus profits over an adequate return of 
revenues from the road, ordinarily a government-guaran- 
teed 5 per cent interest, at which money was borrowed, must 
be paid to the syndicate. In floating the loan the syndicate 
received the profits which were represented by the difference 
between the issue price and the price which the Government 
agreed to take for each £ 100 bonds, after deducting all pre- 
liminary expenses, cost of issue, underwriting, etc. Further- 
more the syndicate usually acted as purchasing agents for 
the supply of materials and were entitled to a commission 
of a certain percentage on the cost. It was also usually 
stipulated that no further loan was to be raised on the 
same security except through the same syndicate, i. <?., dur- 
ing the life of the agreement the syndicate was insured by 
China that the road should not be alienated, or rather that 
the syndicate should be given a lien on the road. The loan 
was to be redeemed only after a certain period by paying a 
premium (if after a shorter period), or at par (if after a 
longer period), or by a special arrangement with the syndi- 
cate if the above two conditions were not provided. 

These general provisions found in the early railway loan 
contracts were not made without reluctance on the part of 
the Government. Some of these contracts are still work- 
ing. Later on, however, as we shall see in the third period 



293] R AILll ' Ays BUILT WITH FOREIGN CAPITAL 65 

of railway development, when contracting new loans the 
Government succeeded after much trouble in modifying 
some of these provisions, especially the most notorious ones. 
Let us now study in greater detail the various railways for 
the construction of which loan agreements were concluded 
on the above old principles, and the various important events 
connected therewith. 

THE BRITISH INTERESTS 

/. The Chinese Government Railways of North China 

We have already traced the development of this system 
up to the time when the Chino-Japanese War broke out. 
Here we are going to say something about its extension to 
Hsinmintun. Newchwang and Peking. 

ATteF the - war with Japan the line w T as extended to 
FengtaTandTrom th ere to Mac rnapu, near Peking. Mean- 
while, the China Railway Company which owned the Tien- 
tsin-Kuyeh section was bought up by the Imperial Railway 
Administ ration, by reimbursing its shareholders with gov- 
ernment bonds bearing 5 per cent interest for their scrip. 

Up to that time the Imperial Railway Administration 
had already owed the Hongkong and Shanghai Banking 
Corporation Tls. 1,240,000; the Russo-Chinese Bank, Tls. 
600,000; and the Deutsche-Asiatische Bank, Tls. 700,000. 
In order to take up these liabilities and carry on the exten- 
sion to Hsinmintun (in Manchuria), Mr. Hu Yen Min. 
the Governor of Peking and Administrator of the road, de- 
cided to float through the British and Chinese Corporation l 
a loan of Tls. 16,000,000, or £ 2,300,000, " for the construc- 
tion of a railway line from Chunghousuo to Hsinmintun, 

1 The British and Chinese Corporation is a syndicate formed by the 
Hongkong & Shanghai Banking Corp. and the firm of Messrs. Jardine 
& Matheson & Co. for 1 . British interests in China. 



66 RAILWAY PROBLEMS IN CHINA [294 

and a branch line to Yingkow (opposite Newchwang), and 
for the redemption of previous loans to the Tientsin-Shan- 
haikwan and Tientsin-Lukouchiao lines." The final agree- 
ment * was then signed on October 10, 1898, with the British 
and Chinese Corporation. 

Under the terms of this agreement the British endeavored 
to establish British railway principles and to create a mono- 
poly for the supply of materials and so forth. The essential 
points in this agreement are as follow : 

1. The loan was to be the first charge upon the security 
of the entire property between Peking and Shanhaikwan, 
and on the freights and earnings of the new lines when 
constructed. 

2. In addition to the above the Chinese Government was 
made to declare itself responsible for the payment of the 
principal and interest at due date; and in the event of the 
Chinese Government being unable to pay the principal and 
interest the railway line and entire property were to be 
handed over to the Corporation. 

3. No further loan was to be raised on the same security 
except through the Corporation; during the life of the loan 
the lines in the agreement were never to be alienated or 
parted with. 

4. The life of the loan was to be forty-five years. 

5. Repayment of principal commenced with the sixth year 
in forty equal annual instalments. Extra drawings (by lot) 
for redemption might be called by paying 20 per cent pre- 
mium on the par value of the bonds. China engaged her- 
self not to redeem or convert the loan except as provided 
in the agreement. 

6. The price of the loan to China was to be 90, but the 

1 Cf. supra, pp. 48 and 63. Notice that the final agreement was signed 
with the British & Chinese Corporation, not with Hongkong & Shang- 
hai Bank. 



295] RAILWAYS BUILT WITH FOREIGN CAPITAL 6/ 

Corporation had authority to reduce it to 88 at its own dis- 
cretion in case the market proved unfavorable. 

7. During the currency of the loan the chief engineer 
of the railway should be a British subject, and the principal 
members of the railway staff should be Europeans, who 
could be appointed by the Chinese Administrator-General, 
but dismissed only in the event of misconduct or incom- 
petency, after consultation with the chief engineer. 

8. A European accountant was to be appointed by the 
syndicate with full power to organize and direct the keep- 
ing of the railway accounts, and to act with the Administra- 
tor-General and the chief engineer in the supervision of 
receipts and expenditures. 

From the conditions prescribed above we see that the 
loan was quite amply secured and safeguarded — probably 
more amply than any loan of such a nature in the world. 
In addition to the mortgage on the property a government 
guarantee was required; and the British engineer-in-chief 
has practical control of all affairs. 

Seeing so many advantageous terms given to the con- 
cessionaire, the Russian Government made an official pro- 
test on the ground that the appointment of the chief engineer 
and accountant would constitute " foreign control of the 
line " and that it would interfere with Russian rights in 
Manchuria. In the meantime the Russo-Chinese Bank also 
entered into competition to handle the loan on more favor- 
able terms to China. Subsequently, as we have seen, the 
matter was adjusted by defining the respective railway 
spheres of interest. 

After this controversy was over construction work was 
pushed on very rapidly. By February, 1900, the line was 
extended to a point thirty miles beyond Yingkow. From 
Kaopangtze the line was also extended further for twenty 
miles. Then the Boxer trouble broke out, the construction 



68 RAILWAY PROBLEMS IN CHINA [296 

program was greatly interfered with, and many parts of 
the line were torn up. 

The Boxer trouble brought the invasion of the allies into 
Peking as well as international complications over the rail- 
way line. The Russians assumed control of the Tonghu- 
Yangtsun (north of Tientsin) section, while the British 
soldiers controlled the Fengtai station, the north end of the 
line. The Russians then proposed that the Germans should 
take charge of the Peking- Yangtsun section and the Rus- 
sians manage the Yangtsun-Shanhaikwan section. This 
aroused the British, who took quick action at once by landing 
a force at Shanhaikwan in September. Following on the 
heels of the British the Russians also sent a force there and 
claimed the section from Tonghu to Newchwang by right 
of conquest. Thus conflicts of interests were precipitated 
among the allies. The relations between Great Britain 
and Russia were especially strained. In 1901, conferences 1 
were held and the different Powers concluded an agreement 
by which the Russians retired and the British Railway Ad- 
ministration was given the control of the Shanhaikwan- 
Peking section. By the end of 1902, the British were also in 
control of the Shanhaikwan-Newchwang section. Later 
on, the whole road was turned over to the Chinese Imperial 
Railway Administration. 

This is the most prosperous line in China. Traffic re- 
ceipts increased by leaps and bounds. The financial basis 
of the road is very firm. Now. the Chinese share holdings 
exceed the British loan participation in the capital of the 
road, and the Government has endeavored from time to 
time to secure a little more right to exercise a voice in the 
control of the road. With the profits of the road, the 
Peking-Kalgan Railway was built by the Government, en- 

1 British Blue Book, China, no. 7 (1901), 127 pages. 



297] RAILWAYS BUILT WITH FOREIGN CAPITAL fig 

gineering works were erected for constructing bridges, while 
cars, locomotives, and even several short branch lines were 
also built. The Tangshan Railway and Mining College is 
also partly supported by this road. 

//. The Shanghai-Nanking Railway 

On May 13, 1898, the preliminary agreement for the 
acquisition of a loan for the construction of this line was 
signed between Sheng-Hsuan-hwai, then Director-General 
of the Chinese Imperial Railway Administration, and the 
British and Chinese Corporation, at Shanghai. On July 
9, 1903, the final agreement * was concluded between the 
same parties. The latter provided for the issue of a sterling 
loan for an amount of not more than £ 3,250,000. The 
bonds were to be issued for the entire sum and were similar 
to those of the Chinese Government Railway of North 
China, with the railway as first mortgage security therefor. 
The price agreed upon for the loan was 90 per cent of the 
nominal value of the bonds which bear interest at 5 per cent 
per annum on their nominal value payable half-yearly. The 
life of the loan was to be fifty years. Before 25 years from 
the date they were originally issued the bonds were to be 
redeemable at £ io2]/ 2 , and after 25 years at par. 

The general principles outlined in the final agreement 
were practically modeled after those of the Chinese Govern- 
ment Railways of North China, with the exception that 
they were described in greater detail and a few additions 
were made. In addition to the Chief Engineer and the 
Director-General, a Board of Commissioners was created 
for surveying the construction and operation of the railway. 

'For English text see Kent, Railway Enterprise in China, Appendix D. 
For Chinese text see Chung Hwa Fa Kwei Tai Tsueucn, treaties, 
vol. vi, leaves 5-17. 



J 



jO RAILWAY PROBLEMS IN CHINA [298 

The members of the Board were to be five in number, of 
whom two were to be Chinese — one to be appointed by the 
Director-General and one by the Director-General in con- 
sultation with the high authorities of the province through 
which the line passes ; and besides the Chief Engineer, who 
was to be nominated by the Corporation and approved by 
the Director-General, there would also be two British mem- 
bers selected and appointed by the Corporation. It was 
clearly stipulated in this agreement that after deducting from 
the income of the railway the working and other expenses, 
the Corporation was to receive 20 per cent of the net profits, 
to be represented by or in form of certificates to an amount 
equal to one-fifth of the cost of the line. 

Although it was stipulated that the loan was to be £ 3,- 
250,000, only £ 2,900,000 has been issued in two instalments. 
In view of the extravagance entailed in increasing the size 
of the loan, the expenses in its underwriting and floating and 
the commission on purchases, the Government authorized the 
balance of the loan and any further funds needed for the 
completion and operation of the line to be supplied from 
the Treasury. 

The entire road was completed by March, 1908. It was 
fairly substantially built, but the trade conditions of the 
region it serves do not demand such an expensive road. 
The capital expenditure on the construction of the line and 
herefore the interest on the loan are so great that there is 
always a large deficit between the fixed charges and the 
earnings in spite of strenuous efforts made to reduce it. 
The Government has to bear this heavy loss. 

As a result of the lessons learnt from the administration 
of this road, in which the foreign chief engineer has sole 
control of the expenditure of the loan funds, China has 
changed her attitude towards all foreign loans, especially 
British loans. This explains partly the reason why China, 



2 99 ] RAILWAYS BUILT WITH FOREIGX CAPITAL yi 

in signing new loan agreements of any importance after 
1905, insisted upon the modification of tbg old British 
principles. 

///. The Tao-Ching Railway 

This railway is sometimes called the Pe king S yndicate 
Railway^ The Peking Syndicate, Limited, was registered 
on March 17, 1897, in London, for the purpose of obtain- 
ing and developing concessions for mining, railway and 
other undertakings in China. It was originally organized 
by British and Italian financiers with a capital of £ 20.000 
which was later increased to £1,520,000. Now the British 
interests practically predominates the syndicate entirely. 

In May, 1898, the Shansi Bureau of Trade signed an 
agreement with the syndicate for working coal and iron 
mines in five different places * in the Shansi province ; and 
in June, the Yu-feng Company signed a mining agreement 
on similar terms with the said syndicate for mining in 
Honan province in the neighborhood of Huai Ching and 
north of the Yellow River. Both of these agreements were 
ratified by the late Government. 

It was stated in Art. 17 of the said agreements that the 
Peking Syndicate, on notifying the Governor of the pro- 
vince concerned, should be permitted to build a railway 
connecting the mines with a main line or with water navi- 
gation. In June 1902, when the coal mines in Sui-wu Hsien 
of Honan province were about to be opened, the syndicate 
gave such notice to the Governor and obtained permission 
to build a railway from these mines to Taokow. a port 
the Wei River. In 1905, the line, extending from Taokow 
to Pashan (near Chinghua Chen) in the Province of Honan 
and covering a distance of about 90^ miles, was completed. 

1 Yu-Hsien, Pingting-chow, Luanfu, Tsecliowfu, and Pingyangfu. 



72 RAILWAY PROBLEMS IN CHINA [300 

At that time there arose an ambiguity in the interpreta- 
tion of the seventeenth clause of the concession agreements, 
which reads : 

Whenever it may be necessary for any mine to make roads, 
build bridges, open or deepen rivers and canals, or construct 
branch railways to connect with main lines or with water navi- 
gation to facilitate transport of Shansi coal, iron and all other 
mineral products from the province, the Syndicate on report- 
ing to the Government of Shansi is authorized to proceed with 
the works, using its own capital without asking for Govern- 
ment funds. 

This clause was interpreted by the government officials as 
restricting the company to local requirements, but the syndi- 
cate argued that they were entitled by it to the right not 
only to build railways in the immediate localities of the 
mines but also to build roads at the discretion of the syndi- 
cate, in other words, to build lines to any market in China 
at their option, if their argument is followed to its logical 
end. 

As a matter of fact, as far back as 1898, besides the sur- 
vey on the Taokow-Pashan-Tzechowfu line, several other 
surveys were conducted by the surveying parties sent out 
by the syndicate in order to find a line to the Yangtsze. 
They found the route from Taokow to Pukow the most 
desirable and made a claim on it. 

About the same time, the British and Chinese Corpora- 
tion, a rival syndicate having the support of the British 
government, secured the concession for the Tientsin-Pukow 
line. In such a situation the interests of the two syndicates 
necessarily came into conflict. Subsequently, this difficulty 
was solved by a combination of the two companies and an 
agreement to equal participation in all future railway de- 
velopment north of the Yangtsze. 



3 oi] RAILWAYS BUILT WITH FOREIGN CAPITAL 73 

Having watched for some time the complicated develop- 
ment of the Peking Syndicate's concession, and realizing 
their error in committing themselves to such an indefinite 
agreement, secured at a time when they were ignorant of 
its value, the government officials set to work to undo their 
mistakes by purchasing the Taokow-Chinghua Railway at 
its construction value. To this end an agreement * was 
entered on July 3, 1905, in which the Government agreed 
to take over the line from the syndicate and to give in pay- 
ment gold bonds bearing interest at 5 per cent, and per- 
mitted the control of the road to remain with the syndicate 
until the bonds are redeemed. 

The cost of constructing the road was estimated at 
£ 614,000 and is represented by a loan of £ 700,000 which 
has been accepted by the syndicate at 90. The loan runs 
for thirty years and is redeemable after 191 6. While the 
line has been handed over to the Chinese Railway Adminis- 
tration it continues to be operated by the syndicate which 
is to receive 20 per cent of the net profits. It was also 
stipulated in the loan agreement that when the syndicate 
has fixed a date for opening mines in the neighborhood of 
Tsechow, the syndicate will provide funds for the construc- 
tion, etc., of the Pashan-Tsechow section. It may be added 
here that the Tao-Ching line was originally not a loan-built 
road, because the loan was contracted, after the completion 
of the road by the syndicate, to buy out the syndicate's 
absolute control of the line. 

Having seen the danger of the indefinite agreement, the 
provincial authorities, at the same time, endeavored to re- 
purchase the Shansi rights from the syndicate. After much 
bargaining with the syndicate and long diplomatic negotia- 
tions with the British minister at Peking they succeeded in 

1 For English text see Supplement to The Far Eastern Review, 
China's Foreign Railway Agreements, Nov., 1909, pp. 6-7. 



74 RAILWAY PROBLEMS IN CHINA [302 

having the syndicate surrender its rights of mining in 
Shansi by offering Tls. 2,750,000. On the other hand, the 
syndicate, in making an agreement with the Shansi authori- 
ties, obtained the promise of a preferential right of supply 
of capital for future enterprises. The agreement provides 
that " if hereafter foreign capital is required for mining, 
iron smelting or transport of materials, the Peking Syndi- 
cate shall have the first option." By " transport of ma- 
terials " it has been presumed by the directors of the syndi- 
cate to mean railways. Here is the germ of possible future 
dispute. 

THE BELGIAN, FRENCH AND RUSSIAN INTERESTS 

/. The P eking -Hankozv Railway 

This was the first railroad for the construction of which 
the Government formally invited the co-operation of foreign 
capitalists. As we have seen in Chapter III, page 35. a 
Belgian Syndicate, willing to accept all terms offered by the 
Government without question, secured the concession by 
underbidding the American and British capitalists. The 
Chinese Railway Company, a government organization, 1 
had already raised a capital of thirteen millions of taels in 
China. On May 27, 1897, a provisional contract was 
signed between the Chinese Railway Company and the 
Societe Unancierc ct industrielle beige en Chine, for a loan 
of 112,500,000 francs bearing interest at 4 per cent. As 
the Belgians found out that the loan could not be success- 
fully floated on this basis, on July 21 an additional protocol 
to the contract was concluded between Sheng Hsuan-huai, 
the Director-General of the Chinese Railway Company, and 
the representatives of the Belgian Syndicate, bringing the 
interest up to 4.4 per cent. When the syndicate wanted to 

1 Cf. supra, pp. 34-35- 



w l RAILWAYS BUILT WITH FOREIGN CAPITAL -- 

finance the project in Europe, the agreement was found still 
unworkable. With the help of diplomatic pressure, in 
which they were assisted by Russia and France, the Belgians 
secured improved conditions from the Government by re- 
vising the original arrangement. On June 26, 1898, two 
more contracts, a loan contract and an operating contract, 
were signed with the Societe d'Etudc de Chemins de fer 
en Chine. 1 in addition to the original contract and protocol. 

The agreement 2 in its final form provided for the issue 
of a loan of a nominal value of 112,500,000 francs (£4,- 
500,000), at 90, represented by 225,000 bonds of 500 francs 
gold, bearing interest at 5 per cent and to be amortized with- 
in twenty years after 1909. The Government was given 
the right to repay the loan in or after 1907, thereby cancel- 
ling the agreement. The bonds were secured on the net 
revenues of the line and the gross revenues of the Chinese 
Government (a new point different from the British con- 
tracts where the whole road was pledged as security). Dur- 
ing the currency of the loan the Russo-Chinese Bank was to 
take charge of all financial arrangements. The 13,000,000 
taels of the Chinese Railway Company was in the first place 
to be applied to the construction and to the putting in com- 
plete working order of the Lukouchiao-Paoting section of 
the line. 

The syndicate has the right to direct the construction of 
the line. The work of construction and technical control 
was placed under a chief engineer appointed by the syndi- 
cate, subordinate to the Director-General. This chief en- 
gineer could select the foreign railway staff, but appoint- 
ments could only be made by the Director-General, who also 

1 A Franco-Belgian syndicate in which the Belgian share was only 
40 per cent. See Documents Diplomatique s, Chine, 1898-1899, pp. 140- 
146 (published, Paris, 1900). 

2 Laboulaye, Les Chemins de fer de Chine (Paris, 191 1), pp. 107-120. 



76 RAILWAY PROBLEMS IN CHINA [304 

had absolute power of dismissal for insubordination, drunk- 
enness, bad conduct, incapacity or carelessness, without the 
sanction of the chief engineer (a far more favorable term 
than that stipulated in British contracts). 

The Societe d'Etude was promised that, with the excep- 
tion of what could be supplied by the Hanyang Works (a 
Chinese semi-official iron and steel establishment), all ma- 
terials and supplies necessary for the construction and work- 
ing of the railroad should be ordered, from the Societe 
d'Etude, which would fill the orders under the best possible 
terms subject to the approval of the Chinese Director- 
General. A commission of 5 per cent was to be paid to 
the syndicate on all purchases abroad. 

Under the terms of the operating contract, the Societe 
d'Etude was to take over the working of the line as soon as 
each section was completed, following its final acceptance 
by the Imperial Administration of Chinese Railways. The 
syndicate or its representatives were to organize the various 
services ; to have absolute right to hire and dismiss the per- 
sonnel for the services ; to make all purchases necessary for 
operating, maintaining or repairing the road; to fix the 
schedule of rates in the terms of the concession contracts; 
and to collect revenues of all kinds and pay the operating 
and managing expenses of the company. These measures, 
taken for operating the line, were to be submitted, for con- 
sultative purposes, to the Director-General of Chinese Rail- 
ways. The Chinese Railway Company, however, was to 
have absolute right of control over the receipts and ex- 
penses. By the operating contract it was also agreed that 
the concessionaires were entitled to 20 per cent of the net 
profits of the undertaking after the payment of all expenses 
and the bond interest. 

In March, 1899, the loan was issued at the same time at 
Brussels and Paris. Nearly four-fifths of it was subscribed 



305] RAILWAYS BUILT WITH FOREIGN CAPITAL 77 

in France. Thus, nominally, the railway was a Belgian 
concession ; actually French interests dominated the line and 
the Russians had also participated in the project. In this 
connection it was confirmed that French and Russian in- 
fluences combined to the furtherance of the Belgian syndi- 
cate's interests during the negotiations for the loan, with 
the ultimate purpose of securing a link in the Peking- 
Hankow line for a railway through the country. 

As a whole, the terms of the agreement were much more 
favorable to China than those of the British agreements, in 
that they gave the Chinese authorities greater control of the 
property. The provisions of the agreement, which gave 
China absolute control of expenditure of funds and the 
privilege to redeem the loan at the end of ten years, placed 
an effective check on any ambitious scheme to dominate the 
railway situation by Belgian, French or Russian interests. 

By the fall of 1905, the line was opened for traffic, with 
the exception of the bridge over the Yellow River, the con- 
struction of which presented many engineering problems. 
The length of the great bridge is 3.03 kilometers, or about 
2 miles, consisting of 102 spans, a part of them 65 and 
the remainder 98 feet in length. The length of the line 
is about 756 miles. 

By 1907, the road was earning large profits. The Gov- 
ernment, considering the great future value and probable 
profits of the line, decided on exercising its right to repur- 
chase the road according to the provisions of the agreement, 
in order to secure absolute possession of the line and elimin- 
ate the payment of the great percentage of profit. Negotia- 
tions were then entered into with the Belgian syndicate 
with a view of issuing a new loan to redeem the old one. 
At that time the capital of the Government for the Lukao- 
chiao-Paoting line was Tls. 5,620,000, and part of the ori- 
ginal Belgian loan was already paid off. It was found that 



78 RAILWAY PROBLEMS IN CHINA [306 

it was necessary only to raise a loan of 50,710,000 francs 
to redeem the old loan. The negotiations were successful. 
On January 1, 1909, the Belgian interest was bought out 
and the line w r as taken over by the Government authorities 
at Peking. In this transaction, the Government promised 
the Belgian syndicate an extra bonus of 705,000 francs as 
soon as the accounts of the road were audited by a commis- 
sion consisting of representatives of the Government and 
of the syndicate. On the payment of the bonds, the syndi- 
cate's connection with the line ceased entirely. 

//. The Pcinlo Railway 

This line runs across the Peking-Hankow road from 
Kaifengfu to Loyang (Honanfu) in the Province of Honan. 
In 1899, the construction of this line was proposed by the 
Government. In 1902, negotiations for a loan took definite 
form and in 1904 a final contract 1 was concluded in 
Shanghai between Sheng Hsuan-huai, the Director-General 
of the Imperial Railways, and the representative of the 
C ompagnic Generate de Chemins de fer ct de Tramzcays 
en Chine, Monsieur Armand Rouffart. 

The contract provides for a loan of £1,000,000 or 25,- 
000,000 francs, issued at 90, bearing interest at 5 per cent, 
secured by the road and guaranteed by the Government, 
which has the privilege of redeeming it in twenty-five years. 
After ten years, the date of first amortization, it can be 
refunded or converted. In the agreement the same general 
rule as applied to the Peking-Hankow road was practically 
adopted for the ordering and purchasing of materials and 
the engagement of the chief engineer and foreign staff. 
The conditions regarding the management of the road and 

1 Chung Hwa Fa Kwei Tai Tsueuen, treaties, vol. xii, leaves 24-33. 
For French text see Laboulaye, Les Chemins de fer de Chine, pp. 
154-170. 



307] RAILWAYS BUILT WITH FOREIGN CAPITAL 79 

the supervision of accounts were also practically similar to 
those of the Peking-Hankow loan contract. A significant 
point provided in the agreement is that the Belgian com- 
pany secured an option x to extend the line to Si-ngan Fu, 
the capital city of Shensi province. 

The road was completed some years ago. The outcome 
of the contract was fairly satisfactory to both parties. The 
road is about 120 miles long and is now in Chinese control. 

///. The Chcng-Tai Railway 

This is a branch line of the Peking-Hankow Railroad, 
running from Chengting to Taiyuanfu. In 1897, the Russo- 
Chinese Bank and the Comptoir d'Escompic sent a French 
engineer into the Shansi province to study its mineral re- 
sources and determine the route of a future railway. In 
May, 1898, a preliminary agreement for a loan of 25,- 
000,000 francs for the construction of this line was ap- 
proved by the Government. On a re-survey, the loan was 
increased to 40,000,000 francs, nominal value, owing to the 
difficult engineering works to be encountered in traversing 
the very mountainous country. The final agreement ' was 
then formally ratified on September 7, 1902, by an Im- 
perial Decree. 

According to the agreement the bonds were to be issued 
at 90, bearing interest at 5 per cent and redeemable in 
twenty-five years. The loan is secured on the undertaking 
and guaranteed by the Chinese Government. 

All the construction and works were executed under the 
supervision of the Imperial Chinese Railway Company. 
The Russo-Chinese Bank engaged to use local materials 

1 Cf. infra, Lung-Tsing-u-Hai Ry. 

2 Chung Ewa Fa Kzvci Tai Tsucucn, treaties, vol. xii, leaves 1-7. 
For French text see Laboulaye, Lcs Chemins de fer dc Chine, pp. 
124-137. 



80 RAILWAY PROBLEMS IN CHINA [30S 

and labor as far as possible, and in any case to spend the 
greater part of the loan on the spot; but in case materials 
were to be procured abroad, they must be purchased by the 
Bank from Russia and France at prices settled by reference 
of the company to the Chinese Ministers in Russia and 
France. 

The construction of the line was turned over to the 
Belgian syndicate of the Peking-Hankow line. The ad- 
ministration of the road rested with the Chinese Railway 
Company. A foreign Agent, paid by the company, was to 
be present at all meetings of the managing officers and to 
exercise supervision over all matters of accounts, machinery, 
etc. The accounts were to be kept after foreign methods. 

After the completion of the railway the yearly surplus, 
if any, left after the payment of working expenses and 
" official profits," was to be dealt with as follows: 5-ioths 
to the Company; should this 5-ioths amount to 30,000 
taels or over, the salary of the Superintendent of the Chinese 
Railway Company would be paid out of it; if the 5-ioths 
did not amount to Tls. 30,000, the salary was to form part 
of the working expenses; 2-ioths to the State; i-ioth to 
the Shansi Trade Bureau to be used for public purposes ; 
and the remaining 2-ioths to the Bank during the currency 
of the loan. 

Construction work commenced in 1903 and the road 
opened for through traffic in 1907. Owing to the moun- 
tains and difficult nature of the country which the line 
traverses, a meter gauge with 60 lb. rail was adopted in- 
stead of a standard gauge. The difference in gauge pro- 
hibits a junction with the main line (Peking-Hankow line), 
and the interchange of cars, compelling the complete trans- 
fer of through freight at the Chentow terminal (a town, 
several miles to the south of Chingtingfu). 



309] RAILWAYS BUILT WITH FOREIGN CAPITAL 8l 

THE AMERICAN INTERESTS 

The Canton-Hankow Railway 
When the American financiers were forced to retire from 
the Peking-Hankow deal by the Belgian syndicate in 1897, 
the Chinese Government, having adopted the policy of 
dividing as equally as possible the railway rights between 
the different Powers, invited the American financiers to 
undertake the Canton-Hankow line. A contract 1 was then 
signed in April, 1898, with the American China Develop- 
ment Company, by Dr. Wu Ting- fang acting as represen- 
tative of Mr. Sheng Hsuan-huai. About the time of the 
execution of the contract the Spanish-American War broke 
out, and nothing further was done until after the con- 
clusion of the war when, in the following autumn, a sur- 
veying party headed by Mr. Wm. Barclay Parsons was 
sent to China. After the survey it was discovered that the 
cost, originally put at $20,000,000 gold, had been under- 
estimated to the extent of nearly 100 per cent. The com- 
pany therefore determined to negotiate a supplementary 
agreement in order to modify certain terms in the contract. 
After overcoming much political difficulty and opposition 
arrayed against him by the French and the Belgians, Mr. 
Cary, a member of the New York Bar, supported from 
Washington and Peking, had the supplementary agreement 
concluded in 1900. In the new agreement 2 the following 
principal modifications of terms were made : 

1. An increase in the amount of the loan to $40,000,000 
gold. 

2. An extension of the time for completion of the road 
from three to five years. 

3. A restriction on assignment, in regard to which a 

1 British Blue Book, China, no. 1 (1899), pp. 336-339- 

2 The Canton-Hankow Railway Contracts, published by the Irving 
Press, 225 Fourth ave., New York City, in 1900. 



82 RAILWAY PROBLEMS IN CHINA [ 3IO 

clause was inserted as follows : " The object of mak- 
ing this supplemental agreement of equal force with 
the original agreement is to permit the benefits being 
transmissible by the American Company to their suc- 
cessors or assigns, but the Americans cannot transfer 
the rights of this agreement to other nations or people 
of other nationality." 
According to the final agreement the loan was to run 
for 50 years, although earlier redemption was provided. 
Bonds, which were secured on the property and guaranteed 
by the Government, were to be issued at 90 and were to 
bear interest at 5 per cent. The American Company was 
voluntarily given by the Chinese Government absolute power 
to direct construction and operation of the line and to con- 
trol the expenditure of the loan funds. At the same time 
the company was granted 20 per cent of the net profits 
of the line after operation for a number of years. 

When the American syndicate 2 secured this advantageous 
agreement, the European combination set to work to un- 
dermine American preponderance by purchasing shares in 
the open market in New York City. The unfortunate death 
of Senator Brice, a man of great energy and remarkable 
character, which qualities had attracted the original sub- 
scribers to the syndicate, caused the enterprise to lose its 
chief supporter and gave the Belgians and the French a 
freer hand to accomplish their aim. Among those as- 
sociated with him was no one who fully shared or was 
able to carry out his ambition of introducing American 

1 The American Syndicate, which was organized by the late U. S. 
Senator C. S. Brice with Wm. Barclay Parsons as chief engineer and 
Cary and Whitridge as attorneys, was composed of practically all the 
great rival financiers of New York, all of whom signed Senator 
Brice's application for the concession. The members of the syndicate 
were J. P. Morgan, J. D. Rockefeller, Mr. Cassatt, the Vanderbilts, 
Mr. Harriman, Mr. Gould, Mr. Sage, Mr. Hill, 'Sir Wm. Van Home 
and other capitalists and leading banking firms. 



3 i i ] RAILWAYS BUILT WITH FOREIGN CAPITAL 83 

railroads into China. Consequently, the Belgian agents 
obtained a controlling number of shares in the company. 
Mr. Parsons, who had succeeded to the presidency of the 
company on Senator Brice's death, was then superseded by 
General Whittier, the agent of the Belgian syndicate in 
New York; and in addition, the American Manager of the 
company's Shanghai office and the American engineers were 
recalled and replaced by Belgians. 

In the spring of 1904, China protested strongly against 
the situation and refused to recognize the Belgian control 
of the company. Through the efforts of J. P. Morgan 
& Company, a majority of the shares were again brought 
under American control. 1 But after that several months of 
complete inactivity followed. An outcry was raised among 
the gentry and merchants of the South, demanding the 
cancellation of the concession. Sheng Hsuan-huai, directed 
by Viceroy Chang Chih-tung who had taken special pre- 
caution to prevent Belgian influence extending to this line 
before the concession was made, then insisted that the 
agreement be cancelled. After tedious negotiations the line 
was taken over by the Government on payment of $6,- 
750,000 gold. Later, the Government handed the road 
over to three provincial companies which were to undertake 
its construction separately in three different sections. 

The American Company had undertaken two surveys, had 
built 32 miles of railway (the Samshui branch), and had 
completed 50 miles of roadbed at the Canton end of the main 
line. They claimed an expenditure of $3,000,000 gold for 

1 According to Mr. J. C. Fergusson's report the stock books in the 
different N. Y. banking offices showed that 6,000 outstanding shares 
were owned by American citizens, members of the original syndicate, 
1,004 by a French banking house and the balance, 1,796, by Belgians. 
Mr. Fergusson was Sheng's foreign secretary despatched to the U. S. 
to investigate the actual situation and to ascertain the cause of the 
delay. 



84 RAILWAY PROBLEMS IN CHINA fo l2 

this work and $3,750,000 as compensation for the loss of 
valuable rights, making in all $6,750,000 gold. This sum 
has been commented upon as unduly excessive. In fact, 
it was the American company who committed the breach 
of faith because it had been particularly stipulated in the 
supplemental agreement that no rights should be trans fered 
to other nationalities. The United States State Depart- 
ment, however, was credited with not having brought any 
diplomatic pressure to bear on Peking to retain commercial 
or political advantages under the terms of the concession. 
Such an attitude taken by Washington was greatly appre- 
ciated in Peking. The United States has always been looked 
upon by Peking as the " most favored nation." As a matter 
of fact, the Chinese Government had granted the American 
company more favorable terms in the agreement than any 
other concession, except perhaps the early Peking-New- 
chwang loan contract. 

During the turmoil of demands for the cancellation of the 
concession, the merchants and gentry of Kwangtung, Hunan 
and Hupeh (through which the line passes) promised with 
great enthusiasm to repurchase the American interests and 
to raise capital in the country to build the line themselves. 
But when the time came for payment of the American loan 
no substantial funds were forthcoming. The British con- 
sul at Hankow then proposed to Viceroy Chang to offer his 
service to obtain a British loan through the Hongkong Gov- 
ernment to redeem the American interests. The negotia- 
tion for the loan was successful. On September 9, 1905, 
a loan agreement 1 was concluded for a loan of £ 1,100,000 
bearing interest at 4^ per cent, redeemable in ten years 
and secured by the opium revenues of Kwangtung, Hunan 
and Hupeh. 

1 Chung Hwa Fa Kwei Tat Tsueuen, treaties, vol. xi, pp. 20-24. 



313] RAILWAYS BUILT WITH FOREIGN CAPITAL 8~ 

Gexeral References 
I. — Official Publications: 

China: 1. Chung Hwa Fa Kwei Tax Tsueuen (Complete set of Rules, 

Regulations, Treatises, etc., of the Republic of China), (Shang- 
hai, 1913), vols, on treaties. 
China: 2. Kuang-su Chong-yau, (The Emperor Kuang-su's Statepapers), 

vols. 11-26. 
France: Documents Diplomatiques, China, issued by the Ministere des 

Affaires Estrangeres, Paris, vols, of the years 1894-1901. 
Great Britain : British Blue Book, China Affairs, vols, of the years 

1898-1901 inclusive. 
The United States: Monthly Consular Reports, vols, of the years 1894- 

1905. 
Mayers ( Wm. F.), Treaties between the Empire of China and Foreign 

Powers, Shanghai, 1901. 
Report of the Compagnie Francaise des Chemins de Fer de I'lndo- 

Chine et du Yunnan, and Societe de Construction de Chemins de 

Fer Indo-Chinois. Paris, 1910. 
Rockhill (W. W.), Treaties and Conventions with or concerning China 

and Korea (.Washington, D. C, 1904), pp. 207-424. 

II. — Treatises: 

Beresford (Lord Charles), The Break-up of China (London, 1898), 

chap, xxiii. 
Brown (Arthur J.), New Forces in Old China (New York, 1904), chs. 

xi-xvii. 
Conant (Charles A.), The United States in the Orient (Boston, 1901). 
Cary (C), China's Present and Prospective Railways (New York, 

1899). 
Curzon (Geo. N.), M. P., Problems of the Far East (Westminster, 

1896), ch. x. 
Davies (H. R.), Yunnan, the Link between India and the Yangtsce 

(Cambridge, 1909). 
Hatch (Ernest F. G.), Far Eastern Impressions (London, 1905), chs. 

x-xv. 
Kent (P. H.), Railway Enterprise in China (London, 1007). 
Krausse (A.), China in Decay (London, 1898), ch. xii. 
Krausse (A.), The Far East (London, 1900). 
Leroy-Beaulieu (Pierre), The Awakening of the East (London, 1900). 

Translated from French by Richard Davey, part I, chs. ix, x, xi ; 

part UI, chs. viii, ix, x. 
Michie (Alexander), The Englishman in China (London, 1000 "), vol. 

II, chs. xxv-xxxiv. 



86 RAILWAY PROBLEMS IN CHINA [^ 

Parsons (Wm. Barclay), An American Engineer in China (New York, 

1900), Preface and chs. ii and ix. 
Reinsch (Paul S.), World Politics (New York, 1900), parts ii and iii. 
Ular (Alexandre), A Russo-Chinese Empire (Westminster, 1904). An 

English version of "Un empire russo-chinois." 

III. — Articles: 

Bowne (T. Johnstone), "Railway Engineering in China," in Cassier's 

Magazine (New York, 1901), vol. xx. 
Cammaerts (E.), " Le Reseau des Chemins de Fer Chinois," in Rev. 

econ. internat. (Bruxelles, 1905), vol. vi, no. I. 
Fauvel (A. A.), " Le Trassinien et les Chemins de Fer Chinois," in 

Revue Politique et Parlementaire, vol. xxi, Sept., 1899. 
Gundry (R. S.), "China: Spheres of Interest and the Open Door," in 

Fortnightly, July, 1899. 
Parsons (Wm. Barclay), "Railway Development in China," in Mc- 

Clure's Magazine (New York, 1900), vol. xv. 
Preyer (Otto E.), " Das Eisenbahnwesen Chinas," in Archiv fur Eisen- 

bahnwesen, Jahrg. 32 (1909). 
Rea (Geo. B.), "Railway Loan Agreements and Their Relation to the 

Open Door," in Far Eastern Review, vol. vi, no. 6, Nov., 1909. (In 

the same number see description of all railways in China up to 

1909.) 
Rigby (Ed. Hulme), and Leith (W. O.), "Railway Construction in 

N. China," in Institution of Civil Engineers, Min. of Proc, vol. 

clx, London, 1905. 
Tepper (Henry), "China and the West," in Institutes of Bankers' 

Jour. (London, 1901), vol. xxii. 



THIRD PERIOD 



CHAPTER VI 
Provincial and Private Enterprises 

The third and present stage of railway development may 
be regarded as commencing during or immediately after 
the Russo-Japanese War. The victory of the Mikado's 
troops over the Czar's not only arrested the increasing 
influence and power of Russia in Manchuria and Peking 
but gave the greatest impetus ever found in the history of 
China to hasten China's xef orm movement, and also stimu- 
lated the patriotic children of China to act more rapidly in 
different fields and in various forms. The progress mad e 
in rail way— aff airs was one-oi th^se^- The different classes 
of the people, instead of the enlightened officials alone as in 
the case of the previous periods, have appreciated the ad- 
vantages and have realized the importance of the iron high- 
way. 

Feeling that their country was dominated by foreigners 
and fired with the laudable ambition to furnish from their 
own pockets the capital required for the building of rail- 
ways in their own provinces, the prominent merchants and 
gentry of the several provinces started a " sovereign right 
campaign." They either filed application with the Board 
of Commerce for the purpose of undertaking railway build- 
ing in their own provinces or petitioned the Waiwupu l 
(Board of Foreign Affairs) to regain some of the conces- 
sions already granted to foreigners, basing their pleas on 
the stipulation with the concessionaires that " those conces- 
sions promised to them can be handed over to any Chinese 

1 The Waiwupu was established by the Imperial Edict of July 24, 
1 901, which has reformed the Office of Foreign Affairs. 

317] 89 



go RAILWAY PROBLEMS IN CHINA [318 

corporation provided they are purely Chinese undertak- 
ings." After accomplishing this they started to raise capital 
entirely from Chinese sources and to organize stock com- 
panies x which, by the way, showed the furthest stage of 
commercial development the people of China have reached. 
Out of these conditions several characteristics were later 
developed in railway matters, viz. : ( 1 ) Private enterprises 
greatly influenced by the sovereign right campaign; (2) con- 
flicts of different interests; (3) nationalization of railways; 
(4) financial combination among foreign syndicates and a 
resultant monopoly. We will study these different phe- 
nomena in their proper place. Let us first of all trace how 
the different private enterprises came about. 

Mr. Chang Yu-nan of Fukien, who made his fortune in 
Java, was the first Chinese merchant who started the first 
purely Chinese railway enterprise. In 1903, he obtained a 
grant from the Government to build a line from Swatow to 
Chaochowfu in the Province of Fukien. The Chaochow 
and Swatow Railway Co., capitalized at $3,303,303 Mex., 
was the first distinctly Chinese railway organization which 
has succeeded in constructing and operating a road. Con- 
struction work was commenced in September, 1904, and 
carried out by Japanese engineers. The road was open to 
traffic throughout its entire length of about 30 miles by No- 
vember,! 1906. But the competition of the slow but cheap 
boat lines wasTso keen and the length of the railway was so 
short that its earnings have been very poor. No dividends 
have been paid since 1906. Now the manager of the road 
plans to raise more funds to extend the line to Sheklung on 
the Canton-Kowloon Railway. 2 

1 Chinese merchants usually formed a " guild " to carry on an en- 
terprise on any large scale. 

1 Anderson, Railway Situation in China, U. S. Special Consular Re- 
port, no. 48, p. 25. (Washington, D. C, 1911-) 



319] PROVISIONAL AND PRIVATE ENTERPRISES gi 

The activity of the private entrepreneurs of China was 
next seen in the Provinces oi ECwangtung and Hunan, )vhere 
the wealthy merchants and gentry combined to redeem the 
American interests when the Belgians gained control of the 
American China Development Co. The Mercantile Ad- 
ministration of Yuet-Han (Canton-Hankow Railway Co.) 
was then organized in 1905 with a capital of $40,000,000 
Mex. on which calls have been made for carrying on the 
work. By 191 1, about one-half (100 miles) of the Kwang- 
tung section of the whole line had been completed. The 
Hunan section has been undertaken by a__separate provincial 
company which has raised about $5,000,000 Mex. and has 
completed about 35 miles of railroad. Owing, however, to 
the difficulty of raising enough funds to push the work for- S 
ward and the strong opposition of the villagers, progress 
has been very slow. 1 

In 1906, we find construction work begun on four other 
private roads, viz., the Hsinning .Railway in Kwangtung 
province, the Kiangsi (Kiukiang-Nanchang) Railway in 
the Province of Kiangsi, the Anhui (Wuhu-Kuangtechow) 
Railway in the Province of Anhui and the Chekiang- 
Kiangsu (Shanghai-Hangchow-Ningpo) Railway. In 1907, 
work on the Fukien (Changchowfu to Amoy) Railway in 
the Province of Fukien and the Tsitsihar Light Railway in 
North Manchuria was started by natives. In 19 10, the rails 
of the Tungkuan-Honanfu (Lotung) Railway in the Prov- 
ince of Honan and the Szechuan-Hankow Railway were 
laid from their respective terminals. 2 

Besides the above lines on which work has been actually 
done there were many other lines projected, e. g., the Har- 
bin-Shuhui-Huilin line, in Manchuria, a light railway of 
about 150 miles; the Yushan (in Kiangsi) to Changshan 

1 Anderson, op. cit.. pp. 21-23. 

1 China Year Book (in English), (London, 1914). PP- 234-242. 



92 RAILWAY PROBLEMS IN CHINA [o 2 o 

(in Chekiang) line; and the Tungpu line. For the con- 
struction of these lines local funds were raised in 191 1. 
There were also other projects which were of less definite 
nature. All these lines, however, had been surveyed before 
the Revolution of 191 1 broke out. 1 

The Chekiang-Kiangsu, the Szechuan-Hankow, the Can- 
ton-Hankow and the Lotung lines are considered trunk lines 
which we will discuss later in greater detail. The rest of 
the roads which have been completed or are under construc- 
tion at present are taken as branch lines and are therefore 
of only secondary importance. It is, however, interesting 
and instructive to study briefly the experiences of a few of 
the private and provincial railway companies which were 
more or less successfully organized and have actually done 
something real and tangible. 

I. The Hsinning Railway 2 

The Hsinning Railway Co. was originally formed with a 
capital of $2,660,000 Mex. Later the capital of the com- 
pany was increased to $4,306,120 Mex., $1,000,000 of which 
represents loans from merchants. The company was or- 
ganized by Mr. Chin Yu-hee, who gained his knowledge of 
railway matters in the United States of America where he 
resided for many years. It was due to his influence that the 
-Chinese residents in the United States subscribed most of 
the capital. A small part of it was subscribed by the Chinese 
merchants in Hongkong. 

The line runs through the Hsinning district of Xwang- 
tung province. The completed section of the line running 
from Kongmoon to Samkaphoi (a harbor site in lower 
Hsinning) via Kongyik and Hsinnighsien is about 68 miles 

1 Anderson, Railway Situation in China, passim. 

3 China Year Book, 1914, p. 239. And The Far Eastern Review, 1909, 
Nov., pp. 254-257. 



32 1 ] PRO l 'ISIONA L A ND PRIVA TE EX TERPRISES 93 

in length. The cost of construction is estimated at $3,510,- 
000 Mex. The company has already secured permission to 
connect with the Canton-Hankow line from Kongmoon at 
Fatshan. 

There are two exceedingly remarkable features in con- 
nection with this road, (a) It is the first railway in China 
financed, constructed and operated entirely by Chinese. Not 
a single cent of foreign money is invested in the enterprise 
and not one foreigner is employed, (b) The salary paid to 
the president of the line is perhaps the lowest received by 
the head of any railway in the world. Mr. Chin Yu-hee, 
the President, Chief Engineer and General Manager, signs 
a voucher for $80 Mex. a month. The success of the enter- 
prise is largely due to his energetic activity and commend- 
able devotion. The completed section of the line is operated 
very economically. Work on the extension has, however, 
been somewhat delayed by the unsettled conditions prevail- 
ing in the country and by the local opposition, because of 
superstitions, to the building of bridges over ponds oiV' 
creeks. 

II. The Kiukiang-N anchang Railway l 
After having obtained the right of way in 1904, the Kiu- 
kiang-Nanchang Railway Co. secured permission from the 
Board of Commerce to issue lottery tickets in order to raise 
the necessary capital for construction. It was originally 
contemplated extending the line from Nanchang to Shao- 
chow to Kwangtung, to connect there with the Canton- 
Hankow Railway. The line was surveyed in 1905, but 
actual construction was not commenced until 1908. The 
company was organized with a capital of Tls. 2,800,000. 
From the beginning financial troubles set in and work was 
greatly retarded. The company had planned to contract 

1 China Year Book, 1914, p. 241. Anderson, o{>. cit., p. 19. 



y 



94 RAILWAY PROBLEMS IN CHINA [322 

loans from local banks, but the money was not forthcom- 
ing in a way to permit rapid work. 

It is reported that only about one-half of the whole line 
of 87 miles in length is near completion. Trains are run- 
ning over a short distance of the road. TJhe engineering 
staff, until very recently, was entirely Japanese. No engi- 
neering obstacle is encountered in building the line, but the 
.•• difficulty of securing a sufficiently large capital from local 
sources to complete the line has embarrassed the railway 
management greatly. 

In 1 9 12, the company arranged a loan agreement with a 
Japanese syndicate for Yen 5,000,000; but the condition 
that all contracts were to be in the hands of the syndicate and 
also the mode of paying the proceeds of the loan aroused 
serious opposition from these merchants and gentry who 
have interests in the enterprise. 



n/ 



III. The Fukien Railway l 

In 1905, the Merchants' Fukien Railway Co. was or- 
ganized by Mr. Chen Pao-chen. In 1906, the route from 
Changchow to Amoy, a distance of 33 miles, was surveyed; 
and a right of way was secured to connect Fukien with 
Kwangtung on the south, and with Kiangsi on the west. 
The company was originally formed with a capital of $6,- 
000,000 Mex. in $5 shares on which a call of one dollar has 
been made from the Chinese residents of the Straits. The 
provincial taxes upon salt and grain were pledged as security 
for interest upon the shares 2 of the company. Thus the 
road was voluntarily transferred to the Provincial Govern- 
ment, notwithstanding the claim of the so-called share- 

1 Far Eastern Review, vol. vi, no. 6, pp. 262-266; and vol. x, no. 8, 
p. 321. 

2 The so-called " shares " as stated in the reports of the company 
are in reality bonds. 



323] PROVISIONAL AND PRIVATE ENTERPRISES 95 

holders, who were ignorant of corporation laws, that the 
road was a private enterprise. 

The officials and engineers of the road are all Chinese. 
The company has contracted with Japanese firms for 
sleepers. In 1909, a year after the construction work 
was begun, all the funds previously obtained were exhausted 
and a loan of $500,000 was raised from the Bank of Com- 
munication. In 1914 less than twenty miles of the line was 
open to traffic; also, the financial strength of the merchants 
had failed. 

IV. The Shanghai-Hangchozv-Ningpo Railway x 
The history of this road teaches a lesson of what is 
known as " Might is Right." We remember that when the 
" Battle for Concessions " was at its height at Peking, the 
British and Chinese Corporation secured with official sup- 
port the preliminary agreement for the concession of the 
Soochow-Hangchow-Ningpo road. As the Corporation was 
fully occupied in financing the Shanghai-Nanking and the 
Kowloon-Canton 2 roads the perfecting of this concession 
was consequently delayed. According to the agreement the 
concession could be canceled. In fact, Mr. Sheng Hsuan- 
huai in 1903 notified the Corporation to this effect, but the 
representatives of the Corporation turned a deaf ear to his 
note. The Ministry of Commerce at the same time recom- 
mended the Throne to cancel the original concession. The 
Manchu Throne took the advice. An Imperial Edict of 
September 23, 1905, transferred the right of construction 
to a provincial railway bureau which was organized to con- 
struct the road with Chinese capital only. Under this au- 
thority two companies — the Kiangsu Railway Co. and the 

1 Far Eastern Review, vol. vi, pp. 240-250. China Year Book, 1914, 
pp. 239-240. 

2 Cf. infra, pp. 133-135- 



96 RAILWAY PROBLEMS IN CHINA ^ 2 , 

Chekiang Railway Co., were formed to construct and oper- 
ate the whole line. The Kiangsu Railway Co. was organized 
with a capital of $3,000,000 to take up the road between 
Shanghai and Fenching. The Chekiang Railway Co., oper- 
ating the road from Fenching to Hangchow and Ningpo, 
was organized with a capital of $5,000,000 all paid up. 

The British Co. then awoke from its lethargy and pro- 
tested very violently against this infringement of its 
rights. Under British diplomatic pressure the Peking Gov- 
ernment had to agree to sign a loan agreement x with the 
British company for a 5 per cent Gold Loan of £1,500,000 
for the construction expenses of the road on terms similar 
to the Tientsin-Pukow Agreement. 2 This loan was strongly 
opposed by the provincial companies on the following 
grounds : 

1. As the British concessionaires did nothing during the ten 
years after the conclusion of the preliminary agreement in 
1897, the concession has now lapsed. 

2. In June, 1903, H. E. Sheng Hsuan-huai wrote officially 
to Mr. Brenan (the representative of the Corporation) to the 
effect that if the concessionaires failed to commence work 
within six months, then the preliminary agreement would be 
cancelled, but no reply was received from the representative 
nor was work begun at that time. 

3. The Chinese Railway Cos. of Kiangsu and Chekiang have 
no need to float a loan from the said Corporation as was done 
for the proposed Tientsin-Chinkiang trunk line, for they have 
funds themselves to build the Soo-Hang-Ning Railway with- 
out assistance. 

4. The natives of Kiangsu and Chekiang obtained Imperial 
permission last year to construct the railway with purely 
Chinese mercantile funds. 

1 Chung Hwa Fa Kwei Tax Tsueuen, Treaties, vol. xi, leaves 24-28. 

2 Cf. infra, pp. 136-138. 



325] PROVISIONAL AND PRIVATE ENTERPRISES gy 

5. The Chinese Railway Co. at Hangchow has now com- 
pleted the construction of the short railway from that city to 
Kianghu and has opened it to traffic as part of the section in 
Chekiang, while the company at Soochow is laying rails for 
the Shanghai-Sungkiang portion and preparations are being 
made to push them forward as soon as possible. 

6. Although the proposed loan of £1,500,000 is to be guar- 
anteed by the Provincial Governments of Kiangsu and Che- 
kiang, yet, as both capital and interest will be repaid out of 
the profits of the railway in future, it is the same as placing it 
on mortgage. 

7. As the construction of railways in China with Chinese 
money is an important matter, the Peking Government should 
exert itself to retain full control, otherwise the consequences 
will be greatly detrimental to both the country and the people. 

Realizing the seriousness of the matter, the Central Gov- 
ernment asked that the two provinces concerned send a 
deputation of delegates to Peking to state directly the case 
against the foreign loan. It might be remarked here that 
the delegation thus summoned was regarded as the begin- 
ning of provincial representation in the capital. The British 
Government, however, brought such a great pressure upon 
Peking that the Central Government, despite the decided 
opposition of the provincial companies supported by a 
unanimous public sentiment, had to complete the manifestly 
unfair loan agreement with the British company in March, 
1908. A vigorous campaign in opposition to this action 
was carried on throughout the two provinces, and new ef- 
forts were made to raise money to operate the completed 
section of the road and to extend the line to Ningpo. In 
June, the Chekiang Railway Co. authorized an increase of 
capital of $15,000,000 to be paid in five instalments. In 
response to the earnest appeal of the company more than 
53,000 persons subscribed for the stock. Nearly 40,000 of 
the shareholders were laborers, farmers and small trades- 



98 RAILWAY PROBLEMS IN CHINA [326 

men. The first call on the new issue of $3,000,000 has been 
paid in. 

The Government was thus placed in a difficult position. 
A deadlock followed. After considerable delay the Gov- 
ernment effected a compromise, by which the construction 
of the line was left in the hands of the provincial companies, 
/while the Board of Communications allotted a certain sum 
of the British loan at 5^ per cent interest, charging 7 per 
cent of the amount as premium. 1 

Having ample funds to complete the whole road, the com- 
panies loaned the money to the local banks at a higher rate 
of interest than that exacted from them by the Government. 
In reality the money obtained from the British company 
was never spent on the road. Although the loan provided 
for the employment of a British engineer and the purchas- 
ing of materials through the British company, the provin- 
cial companies were very reluctant to permit the British 
engineer to inspect the line and had flatly refused to accept 
the purchasing agents' services. Consequently they had to 
pay the sum of $250,000 Mex. in lieu of the 5 per cent com- 
mission for the purchasing agents' services stipulated in the 
loan agreement. 

The Government from time to time vainly endeavored to 
persuade the British company that it should permit the Gov- 
ernment to utilize the funds in other directions. The Gov- 
ernment went on paying 5 per cent interest for five years 
until the line was nationalized in 1913. 2 The British never 
abandoned their hope of securing ultimate control of the 
line. This is the case of a forced loan ! This is the lesson 
of " Might is Right " ! 

The section of the line from Shanghai to Hangchow, 116 

1 Chung Hwa Fa Kwei Tai Tsueuen, Treaties, vol. vi, leaves 28-30. 

2 Cf. infra, p. 128. 



327] PROVISIONAL AND PRIVATE ENTERPRISES 99 

miles long with 36 miles of siding, is completed — the long- 
est private road ever built by Chinese engineers with Chinese 
capital. A part of the section between Hangchow and 
Ningpo, a distance of about 112 miles, has been completed, 
but the road has not been competently managed. No divi- 
dends have ever been paid to the Kiangsu shareholders. The 
Chekiang Railway Co., however, has given its shareholders 
a guarantee of 7 per cent interest on the paid-up value of 
their shares, 1 this constituting a first lien on the revenues of 
the property. 

V. The Szechuan-Hankow Raihvay 2 

The history of the Szechuan-Hankow Railway is some- 
what similar to that of the Shanghai-Hangchow-Ningpo 
Railway. The results of a foreign loan for the former were, 
however, much more serious than for the latter road. In 
1904, a company had been organized by Hsi Liang, then 
Viceroy of Szechuan, in order to prevent a foreign loan 
being raised for the construction of the line. Shortly after- 
wards the services of two Chinese engineers (American stu- 
dents), Messrs. Hu and Luk, were secured to survey the 
line, but nothing developed from the survey. The policy of 
the company at that time was to defer work until sufficient 
funds were in hand to complete the section from Ichang to 
Kweichow, a distance of about 100 miles. 

In 1906, the people of Szechuan and Hupeh took into ser- 
ious consideration the matter of constructing this road, and 
some $600,000 Mex. was subscribed to promote the con- 
struction of this line. A college was also established for 

1 The word "shares" as employed in the reports of this company is 
misleading as the so-called shares are in reality debentures with a 
priority over any further loans. 

2 China Year Book, 1914, pp. 233-4; Anderson, Raihvay Situation in 
China, pp. 16-18. 



IOO RAILWAY PROBLEMS IN CHINA [328 

training railway engineers. Although agitations from those 
who wished to see the railway built with native capital broke 
out from time to time, nothing was actually done on the 
road until 1909 when the Four Nations' Loan question came 
S up, whereupon a considerable amount of capital was raised 
in Szechuan and spent upon it. 

At a meeting of shareholders held in November, 1909, the 
accounts submitted showed that a sum of Tls. 15,405,902 
had been collected in shares, of which only 28 per cent had 
been subscribed voluntarily, the greater proportion of the 
remainder having been collected as " tsu ku," T. e., shares" 
given in exchange for forced levy, payable by every land- 
holder in the form of an addition to his land-tax. Offices 
were established in the different districts to collect the land- 
tax shares, and as there are over 100 districts in Szechuan, 
that number of offices were established. Each office was 
allowed Tls. 200 on every Tls. 10,000 worth of shares col- 
lected — the allowance covering the cost of remitting the 
share money and other sundry expenses. 

During 1910, work was pushed on with great energy. 
Construction was in progress for a distance of 80 miles 
from Ichang toward Kweichow. In May, 191 1, when the 
Four Nations' Loan was concluded by the Government the 
dissolution of the company was threatened, a national revo- 
lution precipitated, and work interrupted. After the revo- 
lution the line was taken over by the Government. 1 

This record of the above-mentioned enterprises is suffi- 
cient to show that the people are more and more interested 
in railway matters and that the pressure from the people in 
favor of railway construction, taking the country as a 
whole, is growing. At the present, as the Government up- 
holds its nationalization policy, a notable feature of the 

1 Cf. infra, p. 129. 



329] PROVISIONAL AND PRIVATE ENTERPRISES IO i 

situation is the comparatively rapid development in different 
parts of the country of the desire for railways tributary to 
the lines already constructed. This shows also an apprecia- 
tion of the need, in the development of local industries, of 
close and convenient connections with trunk lines. Many 
cities are coming to appreciate the fact that they must have 
railway connections at once or their present share of the / 
trade of the country will be lost. In fact, a number of 
small lines have been either projected or are in the course 
of construction : many new enterprises have been inaugu- 
rated, and many ambitious plans are laid out. 

But in almost every case work has been either suspended 
or delayed due to th e lack of fundsjjn the part of the pro- 
moters and, also, to the difficulty of raising the necessary 
money. The fact that some of the railways already in oper- 
ation have been poorly managed or have been operated under 
conditions that make it impracticable to secure fair return- 
on the capital invested in them is a constant discouragement. 
These and other causes have led the Government to take 
over all trunk lines which have been undertaken by private 
entrepreneurs, especially those which have been unduly de- 
layed in execution. 

Nevertheless, the demands of trade in the interior are 
becoming more pronounced in favor of more rapid, safer, 
and better communication. Public sentiment is steadily p re- 
paring for tremendous railway development. It is undoubt- 
edly true that the technics of railroad financing, construction n > 
and management must be learned by the Chinese railroad 
men. As China has the experience of other countries for 
her guidance, in time this problem will be solved one way or 
another. The question of state regulation, especially finan^ 
cial regulation, of private enterprises, has been taken \xqSS 
seriously by the Government but has not been solved satis- 
factorily. The most important question facing the country 



102 RAILWAY PROBLEMS IN CHINA [330 

is that of healthy financing and rapid construction. To give 
encouragemenTTcf The private entCTpnselT^ar-sighted and 
systematic management on the part of the railway managers 
and intelligent legislation on the part of the Government 
are factors absolutely indispensable. As provision is made 
by the Government whereby private companies may under- 
take the construction of branch lines, in the future private 
capital will be used almost wholly for developing the local 
interests. 



CHAPTER VII 
The Railways Built by the Government 

We have studied some of the loan-built railroads in Chap- 
ter V. We will consider the others later. All these roads, 
which are now or have been supervised jointly by Chinese 
and foreigners during construction or in operation, are con- 
sidered Chinese Government railways. 1 If the status quo of 
China can be maintained and in course of time the loans re- 
paid these roads will be, sooner or later, entirely at the dis- 
posal of the Government. The Peking-Hankow road has 
been repurchased by China. Others will be redeemed later. 
In addition to these there are two Government railroads 
which were built under purely Chinese supervision with 
Chinese capital. Now we are in a position to consider these 
two roads. 

I. The Pinghsiang-Chuchow Railzuay 2 

This road was surveyed by American engineers under Mr. 
Wm. Barclay Parsons in 1898, when the reconnaisance was 
made for the Canton-Hankow railway. Construction work 
commenced in 1899. It was built by Chinese and American 
engineers with Chinese capital and is 70 miles long con- 
necting the An-Yuen coal mines under German operation at 
Pinghsiang with Chuchow, a small town on the Hsiang- 

1 See China Year Book, 1914, pp. 219-234. 

1 This road belongs to the 2nd Period. It is placed here simply for 
the purpose of grouping under this heading. Reference: Far Eastern 
Review, Nov., 1909, pp. 318-319. 

331] 103 



IG 4 RAILWAY PROBLEMS IN CHINA [332 

iang River through which coal is shipped to the Hanyang 
teel and Iron Works. 

A college of engineering, mining and language was estab- 
lished, in which Chinese students are trained for the many 
branches of work which require a more skilled labor. With 
the exception of the heads of the important departments the 
railroad engineers, conductors, etc., are all Chinese. 

The cost of constructing the entire line was approxi- 
mately Tls. 3,600,000 (roughly £7,000 per mile). It is in- 
teresting to compare the cost of this road to that of the 
Peking-Syndicate road which was constructed under purely 
foreign supervision with foreign funds. Both roads were 
built with the same objective — the transportation of coal 
from the mines to a navigable river. The Peking-Syndicate 
road has cost the Government £6,830 per mile for its trans- 
fer, or, allowing for certain contingencies, the same as the 
Pinghsiang line. 

II. The Peking-Kalgan Railway x 

The construction of this line was commenced from Peking 
in October, 1905. Nine months later, the Nankow Pass 
was reached, a distance of 32 miles, and by the end of 1909 
the whole line was completed. Its total length is about 130 
miles, extending to Tatungfu in the Province of Shansi. 
There are many weighty facts of construction, including 
tunnels, at the Nankow Pass, where a gradient of 1 in 30 
for five miles has been introduced. Mr. Jeme Tien-yow, a 
Yale graduate, was appointed as the Chief Engineer to un- 
dertake the construction work. When the construction of 
the line was first proposed many people believed that the 
Nankow Pass would present insuperable difficulties from 
the engineer's standpoint. When Mr. Jeme suceeded in com- 

iFor Eastern Review, Nov., 1009, pp. 320-328. 






333] RAILWAYS BUILT BY THE GOVERNMENT 10 - 

pleting this important work he was hailed throughout the 
world as the " father " of Chinese railway engineers, and 
honors were heaped on him by his fellow-countrymen and 
by his Government. 

The line was built entirely under Chinese supervision and 
from the surplus profits of the Peking-Mukden Railway. 
In the construction of this line there are several features 
w r hich render it distinct from other railroads in China : 

i. It is the first Government railroad built entirely by 
Chinese — not a single foreigner has been employed. This 
is a national pride. The successful manner in which the 
construction work has been carried out is a striking object- 
lesson of what can be accomplished by the people of China 
who have received a technical training. It acts also as an 
incentive to other Chinese enterprises. 

2. It was the most serious engineering proposition ever 
undertaken in China. In the Nankow Pass, besides the 
steep gradients and a number of sharp curves, heavy cuts 
and fills were required and four tunnels, the total length of 
which is 5,370 feet, had to be pierced. Furthermore, the 
engineering difficulties in the Kimingyih-Kalgan section of 
the line were almost as serious as those of the Nankow Pass. 

3. Considering these engineering difficulties, the substan- 
tial character of the road and the low cost of construction 
(under £10,000 per mile), it may be said that this road has 
established a record in mountain railway building. This at 
the same time shows that there was strict honesty in super- 
vising the work. " Economy on the Peking-Kalgan Rail- 
way has been almost reduced to a science," says the World's 
Chinese Students' Journal of Shanghai (1909). 

The road is of great political importance. It facilitates 
communication between Mongolia and China proper. 
Russia has endeavored to undermine the loyalty of the 



^ 



io 6 RAILWAY PROBLEMS IN CHINA [334 

tribal chieftains in Mongolia. When the road is ultimately 
extended to Urga (the capital of Outer Mongolia) and to 
Kiakta (the frontier town), China will be able to strengthen 
her control over that vast region. 

The road has also great commercial value, for it taps the 
overland trade of North China and Mongolia. With the 
completion of the road, Kalgan, the great soda-manufactur- 
ing center and the seat of extensive transit trade between 
North China and Mongolia, will present a different pros- 
pect and undoubtedly become very prosperous. As to the 
line itself it supports its upkeep very satisfactorily. In 191 1, 
the net revenue of the line amounted to over $3,500 Mex. 
per mile, and in 19 12 to $9,000 per mile — a good result. 
The surplus is being used to extend the line. 



CHAPTER VIII 
Nationalization of Railways 

The policy of nationalizing the railways which form the 
different sections of the future trunk systems became more 
definite and prominent in 1911, when Mr. Sheng Hsuan- 
huai headed the Ministry of Communications and Posts. 1 
TRe memorials 01 the Tsung-h ¥amen and the Board of 
Mines and Railways, and of such prominent men as Li 
Hung-chang, Chang Chi-tung and others, presented to the 
Manchu Throne, and the Imperial edicts given out corres- 
pondingly from time to time, seemed to indicate the exist- 
ence of such a policy; nevertheless, it was not considered 
seriously in those days. Mr. Tsen Chun-hsuan, who held 
the post of the President of the Board of Communications 
for a short time in 1907, had also petitioned the Throne 
suggesting the advisability of having China's railways under 
proper unified control with a proper system, 2 but again his 
views were not taken into serious consideration. Mr. Tsen 
did not suggest the taking over of the private roads. 

Mr. Sheng's policy was to have all trunk lines built, oper- 
ated and controlled by the Government and to have those 
I under private construction resumed by the State. 3 In order 

1 By an Imperial Edict of Nov. 6, 1906, which was issued to reform 
the Metropolitan official system, the Board of Communications and the 
Board of Navy were created to control the services and systems of 
telegraph, steam navigation, railway and post. 

1 English translation of the memorial, in Journal of the American 
Asiatic Association, Feb., 1910, p. 14. 

3 Cf. infra, pp. n 6- 117. 

3351 I07 



io 8 RAILWAY PROBLEMS IN CHINA [336 

to explain how this important policy came about and to note 
its effects upon the national life of China, it is desirable to 
record the essential facts which occurred after 1906 in re- 
gard to the railway. 

I. The Conflicts of Interest 

After 1906, as we have seen, a number of provincial 
companies came into existence, mostly for patriotic rea- 
sons. Some of them secured concessions directly and some 
of them indirectly through the provincial Administrations 
from the Central Government which at that time had no 
definite idea whatsoever of state ownership or of central 
control of trunk roads. It granted concessions to the pro- 
vincial companies simply with the expectation of construct- 
ing the railways by its own people, thus preventing the 
trouble of raising foreign loans and eliminating foreign con- 
trol. Hence, even some of the trunk lines were granted to 
the provincial companies for financing and construction. 
The Shanghai-Hangchow-Ningpo, the Canton-Hankow, the 
Szechuan-Hankow, the Tungpu and the Lotung lines were 
the most notable instances. But later on when it was dis- 
covered that the provincial companies had not carried out 
the work satisfactorily and the construction of the lines was 
either too slow or totally suspended, the Government began 
to change its attitude towards them and planned to cancel 
* the provincial concessions. 

Meanwhile, the country__was-4n- a precarious -situation. 
China's neighbors made trouble with her. Japan on -the- 
A r alu, Russia on the North, France and Great Britain in 
Yunnan and Kwangsi had all raised boundary ques- 
tions. Internal troubles arose everywhere.. Secret societies 

in the South were particularly active aiming to overthrow 
the Manchu dynasty. From every point of view further 
humiliation of the country seemed inevitable and days of 



237] NATIONALIZATION OF RAILWAYS IO g 

trouble for the Empire were not far off. For the sake of 
preserving the prestige of the dynasty and the safety of the 
country, the Government realized that at the critical moment 
a show of force must be made. 

The new army of thirty-six divisions had already been 
successfully centralized under the command of the Minister /C 
of War instead of being placed under the command of the 
several governors and viceroys separately as it was before. 
But jji e lack o f transportation with the South and the West 
would render the mobilization of this army impossible. 
Such a condition demanded the construction of the lines 
linking the four quarters of the country without delay. As 
the provincial companies could not accomplish what the 
Government expected them to do, naturally the Government 
stepped in to take the matter up itself and adopted the same 
policy wrEHTegafdTo the railway as to the new army. 

BuTthe Treasury wal empty. It was impossible for the 
Government to accomplish its. object without raising loans 
abroad. Therefore, on June 6[ 1909, Chang Chih-tung, then 
Grand Councillor, signed a preliminary agreement with the 
representatives of some British, German and French banks 
for a loan of £5,500,000 for the construction of the Hupeh- 
Hunan section of the Canton-Hankow line, the Hankow- 
Szechuan road and for other expenditures. These two 
roads are of national importance. The former when com- 
pleted will connect Peking with Canton, while the latter will 
connect Chengtu (the capital of Szechuan) with Hankow 
(the Chicago of China). 

Since an agreement had been made on October 1, 1903, 
between Prince Ching, then President of the Foreign Board, 
and Sir Ernest Satow, then British Minister at Peking, stip- 
ulating that American capital might be admit toil to the 
Szechuan road, a group of American financiers accordingly 
wanted to co-operate in the loan. China was glad to ha\e 



HO RAILWAY PROBLEMS IN CHINA [338 

American participation in the loan, because she has more 
confidence in the United States than in any other country. 
But the three banking groups, who had already secured the 
concession, refused to admit a new partner. The State De- 
partment of the United States then came out and exerted its 
influence for the benefit of a particular syndicate 1 which it 
designated to take up the loan. The basis for intervention 
on the part of the American Government was the promise 
made by Prince Ching in his Red Note of July 18, 1904, to 
the American Minister, Mr. Conger, replying to the applica- 
tion of the China Investment and Construction Co. for a 
loan conce'ssion for the Hankow-Szechuan road. After 
much tedious diplomatic negotiation 2 the United States 
succeeded in her demands for participation in the loan. On 
August 17, 1909, another contract was drafted by which 
the loan was raised to £6,000,000, divided equally among 
the four groups ; hence it is called the "Four Nations' Loan." 
But the matter was not settled. Russia and Japan, who 
have not sufficient funds to exploit their own resources and 
no money to lend, also desired to participate in the loan, and 
urged a further increase of the amount of the loan. Further 
discord arose. The loan was thereby temporarily suspended. 
International controversy then followed. Severe accusa- 
tions were exchanged between the Powers. We will study 
this phase of the controversy in connection with the loan 
later. Its brief outline is mentioned here simply for the pur- 

1 Secretary Knox turned the financial negotiations over to the Wall 
Street bankers, headed by J. P. Morgan & Co., and advised them to 
put in a claim for participation, at the same time ignoring the claim 
of the China Investment & Construction Co., which had secured the 
original promise from the Chinese Government. Members of the 
latter company severely criticized Secretary Knox for favoring the 
former. See Wall St. Journal, Feb. 15, 1910. 

* Cf. infra, Hukuang Railways. 



339] NATIONALIZATION OF RAILWAYS UI 

pose of showing its effects upon the people of China and its 
relation to the nationalization program. 

The threatening actions of Russia and Japan, the quar- 
rels and turmoil among the Powers themselves, and above 
all the shaking of " mailed fists " at China by the aggres- 
sive Powers produced a bad impression upon the chil- 
dren of China who suspected that there were pernicious_j 
schemes planned by the aggressive Powers. Meetings were 
held everywhere. Many Railroad Associations were formed 
to recover the sovereign rights. Patriotic subscriptions were 
made for the building of the two roads. Telegrams and pe- 
titions of protest were sent from all classes of the people to 
the central authorities. The students and gentry of Hupeh 
and Hunan warned Peking that they would resist the con- 
struction of any railroads in their provinces unless the 
terms of the loan contract were first submitted for the ap- 
proval of the provinces concerned. As in the case of the 
Shanghai-Hangchow-Ningpo road, delegates were sent by 
the two provinces to the Central Government to state their 
cases against he loan. According to the telegrams sent to 
Chang Chih-tung and the Board of Communications and 
Posts they protested against the loan on the following 
grounds : 1 

i. Foreign loans had always proved detrimental to 
Chinese political interests. 

2. Since over eight-tenths of the Chinese railroads were 
controlled by foreign Powers, further alienation would 
prove harmful. 

3. By the Imperial Edict of 1899, 2 prepared by the Bureau 
of Mines and Railways, Chinese were to have prior right in 
the construction of their own railroads. 

1 Journal of the American Asiatic Association, Oct., 1911, vol. xi, no. 
9, P- 277. 

2 Cf. supra, pp. 37-39- 









II2 RAILWAY PROBLEMS IN CHINA [340 

4. The Provincial Railway Association guaranteed to 
raise the necessary amount of money, if privileges and al- 
lowance of time similar to those granted to the foreign 
Powers were accorded to it. 

The provincial attitude was so determined and so firm 
that the ratification of the loan was further delayed. On 
the other hand, the loan Powers, except the United States, 
demanded its early ratification by addressing an incidental 
note to the Waiwupu. The Peking authorities were thus 
placed in a very delicate and difficult position. Another 
deadlock similar to that of the case of the Shanghai-Hang- 
chow-Ningpo road was followed for more than one and a 
half years by patriotic agitation on the one hand in the prov- 
inces concerned and by diplomatic controversy on the other 
in Peking. 

Meanwhile, heroic measures were taken by the two prov- 
inces to raise the necessary annual allotment on the shares 
in order to construct their portion of the southern trunk 
line. But the materialization of the funds was slow and a 
slight progress in the construction work was made only 
with waste and extravagance. Agitations, however, still 
continued and spread far and wide with great rapidity. 

The people of China now as a whole feared that the na- 
tions which advanced the money would obtain internal con- 
trol over the affairs of the country and that the application 
of the Hukuang Loan (i. e., Four Nations' Loan) would be 
but the fastening of the last nail in the coffin for China. 
They denounced the action of the Government as a grave 
blunder. The suspicious procedure in the loan negotiations 
and the pretensions of Russia and Japan added " oil to the 
flames ". The people then demanded a more intimate ac- 
y quaintance with the management of the affairs of the coun- 
try. The Manchu Throne was compelled to grant on Octo- 



34 1 ] NA TIONALIZA TION OF RAILWA YS u^ 

ber 14/1909, the establishment of the National and Provin- 
cial Assemblies. The provinces' persistent opposition to the 
humiliating foreign loans had giv en impetus to the constit u- 
tional movement. 

Nevertheless, each province was desirous of building its 
own railroads and of making out of them whatever profits 
might accrue. Grand Councillor Chang Chih-tung had 
formulated a scheme, generally acceptable to the provin- 
cial delegates at Peking, whereby the profits and control of 
the Government railways would be divided upon a prear- 
ranged scale between Peking and the provinces concerned. 
Had his death in October, 1909, been deferred, the loan 
question would have been solved without serious conflicts. 

It is desirable to point out here that it is a false belief 
that the people of China are opposed to all foreign loans. 
They opposed some particular loans jpnly^ which were nego- 
tiated under suspicious circumstances and humiliating con- 
ditions. As a matter of fact, the provincial companies, who 
have endeavored to secure foreign loans on their account 
without vexatious financial supervision, hawked their 
securities in the money markets in Shanghai and elsewhere 
in China. Simply because of the formal declaration of the 
Imperial Edict, attached to the railway regulations * pre- 
pared by the Board of Mines and Railways, that provincial 
loans or loans raised by any Chinese merchants which have 
not been sanctioned by the Central Government would not 
be recognized as Imperial liabilities, and for the lack of suf- 
ficient guarantees and proper information about their finan- 
cial condition, these securities were rejected by the foreign 
banks and commercial houses. 

Nevertheless, the provincials continued their campaign of 

'" Revised Regulations for Railway Construction in China," U. S. 
Monthly Consular Reports, Apr., 1904, vol. lxxv, no. 283. 



HA RAILWAY PROBLEMS IN CHINA [342 

agitation and forced the Peking authorities to recognize 
their rights to build the roads as provincial undertakings. 
The Peking Railway Administration was at the same time 
accused of corruption and graft. On the other hand, the 
Central Government, anxious for the application of the Hu- 
kuang Loan and the centralization of the railways, declared 
that the provincial railway administrations could practically 
accomplish nothing but flagrant dishonesty and waste of 
money and time. 

While the provinces insisted upon the recognition of their 
sovereign rights, the Central Government intended to estab- 
lish its authority more strongly all over the country. It 
was too weak, however, to impose its Imperial will on the 
'/provinces against their protests. None of the responsible 
chiefs of the Boards of Finance and Foreign Affairs, not 
even the Prince Regent and the Grand Councillors, endeav- 
ored to stand out and meet with courage the revolt in Hunan 
and Hupeh, threatened if this course were pursued. They put 
the responsibility upon the nation and the obligations toward 
the foreign Powers upon the shoulders of the President of 
the Board of Communication and Posts. As the Board of 
Communications and Posts was the storm center no offi- 
cial, willing or strong enough to assume any responsibility, 
could be found to preside over it. This explains the short 
terms held by Mr. Sheng's predecessors in this office, most 
of whom were sacrificed to the hostility and intrigues of the 
provincials. In 19 10, as we remember, when the Ministry 
of Communications proposed to nationalize the Shanghai- 
Hangchow-Ningpo road, agitation was so strong that it had 
already practically led to and later culminated in a revolt. 

When Mr. Sheng Hsuan-huai was raised to the Presi- 
dency of the Board of Communications in January, 191 1, 
he proved himself courageous enough to carry out the Im- 
perial will. Mr. Sheng was regarded with great esteem by 



343] NATIONALIZATION OF RAILWAYS n 5 

the Peking authorities because of his intimate relations with 
the Hukuang gentry. 1 His ability was recognized by for- 
eigners and Chinese alike, and he was depended upon to win 
over the people and thus overcome their hostility to the Hu- 
kuang Loan, the terms of which could not be altered at that 
time because the foreign banks considered them already too 
liberal for the safeguarding of their investments. But, un- 
fortunately, he was not strong enough, or rather the Gov- 
ernment was not strong enough to support him, and his 
records in the administration of the China Merchants' Steam 
Navigation Co. and of the Imperial Telegraphs were not 
clean enough to secure the confidence of the people. 

To make matters worse, within four months of office he 
had produced in the history of China an extraordinary per- 
iod of frenzied finance and had increased China's indebted- 
ness on paper by £17,500,000 sterling. 

On March 24th, a loan of Yen 10,000,000 from the Jap- 
anese and on April 7th, another of £500,000 from the East- 
ern Extension and Great Northern Telegraph Cos. were 
floated by him for the purpose of defraying the expenses of 
the Board. By April 18th, he had contracted with the Four 
Nations' Banking Group a loan of £io,ooo,ooo, 2 thirty per 
cent of which was to be expended for Manchurian develop- 
ment, the balance for currency reform. The people were 
greatly excited by the announcement of the latter big loan. 
They sent to Peking violent protests which the Government 
ignored until too late. 

After having concluded the above successfully, Mr. Sheng 
then turned his attention to the perplexing railway prob- 

1 The Pinghsiang Colliery and Railway, the Taych Iron Mines and 
the Hanyang Iron & Steel Works, all located in Hunan & Hunch, had 
been managed by Mr. Sheng. 

3 This loan was not floated owing to the Revolution of 191 1. See 
China Year Book, 1914, chapter on Finance. 



n6 RAILWAY PROBLEMS IN CHINA [344 

lems. He decided to have the question of authority cleared 
up once for all and definitely settled between the provinces 
and Peking, because in almost every case the provinces op- 
posed the application of such foreign loans as were handled 
through the central authorities. He knew well that until 
this vital question of provincial and central rights was 
solved one way or the other, railway development through- 
out the whole country would remain at a standstill. 

Realizing that, without a more effective control over the 
loan funds, the foreign financiers would never agree to ad- 
vance the vast sums required for reorganization and re- 
form, and aiming to carry out the Imperial desire which em- 
bodied an active federal policy of strengthening the Central 
Government immediately after the organization of the Coun- 
cil-Cabinet, 1 Mr. Sheng chose the method of centralization 
in dealing with the railways. The policy of centralization of 
the control of railways was then clearly outlined. With the 
support of Prince Ching's Cabinet he obtained the approval 
of the policy from the Throne which had been convinced of 
the disorganization and weakness resulting from the failure 
of the. provincial companies' attempt at railway construc- 
tion. On May 9, 191 1, a most important Imperial Edict 3 
was issued on Mr. Sheng's advice, proclaiming in part as 
follows : 

After careful and repeated deliberations, the nation must pos- 
sess a complete system of trunk lines to and from the four 
quarters of her territory in order to administer the Govern- 
ment by a grasp on the central pivot. . . . Therefore, we de- 
sire to proclaim explicitly to the world that all the trunk rail- 

1 The Edict, abolishing the Grand Council and organizing a Cabinet, 
was issued on May 9, 191 1, while amendments were made in the As- 
sembly regulations giving greater power to the people. See Peking 
Gazette of May, 191 1. 

'Ibid. 



34 -] NATIONALIZATION OF RAILWAYS ny 

ways shall be State-owned ; this shall be the fixed policy. 
Whatever trunk railways in the provinces which were under 
private management by companies established before the third 
year of Hsun Tung (1911) have delayed in construction long 
enough, they shall immediately be taken over by the Govern- 
ment as State-owned, and their building work shall be pushed 
on with energy. With the exception of the branch railways 
which shall continually be allowed to be undertaken by the 
people according to their ability, all cases of trunk railways 
formerly granted shall be cancelled. With regard to the de- 
tails in the manner of taking them over, let the Ministers of 
Finance and of Communications and Posts gravely obey this 
Decree, and devote their whole attention to devising the fulfil- 
ment of it. . . . 

Following this Edict another Imperial decree, purposing 
to prevent any local manipulation of local shares, was issued 
prohibiting the sales of railway shares in the provinces of 
Hunan, Ilupeh and Szechuan and directing the viceroys and 
governors to assume responsibility for the maintenance of 
order and the protection of officials engaged in the nation- 
alization of the Canton-Hankow and Szechuan-Hankow 
trunk li nes and the ca rrving-out of the construction program. 
Mr. Tuan Fang was then sent to Hupeh, Hunan and Sze- 
chuan to explain the Government railway policy and was 
appointed Director-General of these two lines with the au- 
thority to handle their transfer. Also, all provincial and 
railway officials were instructed to facilitate this transfer. 
Mr. Tsen Chen-hsuan was despatched, as Viceroy of Sze- 
chuan, to replace Mr. Chao Ehr-feng. 

Twelve days after the proclamation of State ownership 
of railways the signing of the Hukuang Loan of £6,000,000 
was announced. This loan was to be floated by the Four 
Nations' banks. It had been under negotiation for two 
years and was the crux of the contentions between the prov- 



n8 RAILWAY PROBLEMS IN CHINA [346 

inces and the Central Government, between the Government 
and the Powers interested and among the Powers them- 
selves. 

The Hukuang agreemnt and the nationalization edict 
were regarded by the Provincial Assemblies and the Rail- 
way Bureaus as successive direct challenges and breaches of 
promises by the Government. Protests came to Peking 
from almost every Provincial Assembly, from almost every 
railroad company and from different kinds of associations 
and newspapers. The Government was accused of break- 
ing its promise to cencede the people the right of consid- 
eration of national affairs, of floating loans and of depriv- 
ing the Chinese of the right to build their own railways 
without placing the questions before the National Assembly 
for consideration and approval. Delegates w r ere appointed 
by various " Railway Protection Societies " to visit Peking, 
to present their argument against the foreign loans, etc. 
Their first intention was to oppose absolutely foreign loans. 
When they reached Peking, however, they modified their 
attitude to a claim that the various matters under protest 
should be decided by the National Assembly and that the 
Government should abide by its decision. 

Pending the deliberation in Peking, matters in the prov- 
inces went from bad to worse. The methods adopted by the 
Government for taking over the provincial interests were 
defective in many respects and appeared unjust to the eyes 
of the private owners. The principle outlined for redeem- 
ing the various lines from the private owners was to pay the 
shareholders in cash the actual value of their property as 
constructed up to the time of transfer, and further to repay 
to them out of the prospective profits of the road any money 
that had been wasted or otherwise lost in the enterprise. 

For the redemption of the Hunan-Hupeh section of the 
Canton-Hankow road the Government was to pay the share- 



. 4 ~] NATIONALIZATION OF RAILWAYS 119 

holders cash to the amount of 60 per cent of their share 
script, and to give them bonds for the other 40 per cent, 
payable out of the future profits. 1 It seemed at one time 
that the financial interests in Hunan and Hupeh were at the 
point of accepting the terms offered and that the people 
there might possibly have been pacified. 

But the Government was not willing to pay the share- 
holders of the Szechuan-Hankow road what they wished 
in cash because only a very little actual construction w< >rk 
had been done by the company. The Government pro- 
posed to settle with the shareholders by making good the 
funds, which the company had wasted, out of the future 
profits of the road. The Szechuan Railway Bureau strongly 
objected to this method of settlement with the shareholders. 
The Government, on Mr. Sheng's advice, acted with firm- 
ness and with no intention of changing its plan in the im- 
pending crisis. Agitation was then directed against the 
manner in which the policy of nationalizing the railways was / 
carried into effect by Mr. Sheng Hsuan-huai. 

To make matters worse, Air. Tuan Feng (who was later 
murdered by the Szechuan people) and Air. Tsen Chen- 
hsuan had brought troops with them upon their mission. 
This startled the already angered populace in Szechuan ^/ 
and elsewhere. The people of Szechuan then demanded 
an explanation of such an action. The reply was unsatis- 
factory. Therefore, they suspected that the real reason of 
the Government's wishJio secure control of the railways was 
to use them for military purposes in keeping the people in 
subjection. The Province of Szechuan passed from agita- 
tion to revolt. The avowed revolutionis ts and constitution- 
alists lost no time in taking the long and eagerly looked: 
for opportunity of carrying on a hut campaign against the 

1 U. S. Daily Consular and Trade Reports, Sept. 9. ion. no. 219. 



120 RAILWAY PROBLEMS IN CHINA [348 

Manchu Throne. From city to city, from province to pro- 
vincepthe fire continued to spread. ... On October 10, 191 1, 
the explosion of a bomb in the city of Wuchang, capital of 
Hupeh, signaled the downfall of the Manchu dynasty; and 
the world was astounded by the most remarkable revolution 
of modern times. 

Subsequent events showed, however, that not all the peo- 
ple opposed the nationalization policy as such. Most of_ 
them opposed it because of the manner and method by which 
the policy was carried out. To say that the revolution was 
caused entirely by Mr. Sheng's policy or by the conclusion 
of the Hukuang Loan Agreement is to misread history. 
By article III of the Loan Agreement, 1 it had become in- 
cumbent upon the Government to take over the lines already 
constructed in Hupeh and Hunan. This was resented by 
the shareholders, who showed their dissatisfaction in the 
usual way. The differences over the matter would no doubt 
have ultimately been settled had not other forces such as 
floods, famine and, above all, the revolutionary campaign 
which had been at work for years seeking to overthrow 
the Manchu dynasty and to restore Chinese control, united 
to make the revolution popular. 

II. The Government's Railway Policy 

During the Revolution of 191 1, the Provisional Gov- 
ernment at Nanking under Dr. Sun Yat-sen had been pre- 
pared to pledge to the Japanese independent bankers for 
whatever loans they could raise the properties of the China 
Merchants' Navigation Company, the Kiangsu, Chekiang, 
Kiangsi, Fukien lines and the southern section of the 
Canton-Hankow road, the Hanyang Coal, Iron and Steel 
enterprises and other mining and industrial companies. 

1 Cf. infra, Hukuang Loan Agreement and References. 



349] NA TIOXALIZA TION OF RAILWAYS Y 2 i 

These loans were, however, checked by the Government at 
Tokio, owing in some cases to the protests of the British 
and of other foreign governments. Out of the efforts made 
by the Nanking Government to raise foreign loans only a 
few negotiations were successfully concluded and only small 
advances were obtainable. 1 

After his resignation from the Provisional Presidency, 
in September, 191 2, Dr. Sun was empowered by President 
Yuan Shi-kai to organize a national corporation or com- 
pany for the financing and construction of future railways 
in China. The Chinese National Railway Corporation was 
thereby organi zed at Shanghai with Dr. Sun as its Direct or- 
generaTT Dr. Sun then appointed M r. George Bronson Rea 2 
as Technical Secretary. The plans of the corporation were 
accordingly outlined comprising a comprehensive scheme 3 
for the constructionTof io^bbo miles oTessential trunk lines 
which were to be financed and constructed over a period of 
from ten to fifteen years, calling for an expenditure of 
approximately £100,000,000. 

Mr. Rea was then delegated by Dr. Sun to visit Europe 
and initiate negotiations for financing the contemplated lines. 
Mr. Rea succeeded in arranging a contract on a percentage 
basis with Messrs. Pauling & Company, a great railway 
contracting firm of London, for financing and constructing 
the Canton-Chungking line. 4 The contract was signed at 

1 Far Eastern Review, Apr., 1912, special copy on " Financial and 
Historical Review of the Chinese Revolution." 

2 Mr. Rea is the proprietor and editor of the Far Eastern Review 
(Shanghai), a monthly devoted to Commerce, Engineering- and 
Finance in the Far East. 

3 For details of the scheme see China Year Book, 1914, chapter on 
Communications. For map of the scheme see Far Eastern Review, 
June, 1913, p. 15. 

4 Cf. infra, pp. 160-161. 



122 RAILWAY PROBLEMS IN CHINA r->-, 

Shanghai on July 4, 191 3, between Dr. Sun and Lord 
French, the representative of the Pauling firm. Later when 
Dr. Sun was implicated in the Second Revolution against 
President Yuan his powers as Director-General of the 
Chinese National Railway Corporation were annulled by 
the President in a special mandate issued two days after 
the outbreak of the revolution. The Corporation was there- 
by dissolved. The contract, which was regarded by Mr. 
Rea as creating a new precedent for the construction of 
railways in China " because of the most favorable financial 
and construction terms ever accorded to any government for 
this kind of work," was transferred with little modification 
by the Peking Government to the Shasi-Shingyifu Railway. 1 
Although the form of government was changed, the 

/ policy of centralization could not and most probably will 
not be changed for generations to come. From the be- 
ginning of the new Republic the difficulties of central con- 
trol of finance were felt. The determination of the Pro- 
visional Government at Peking to retain all borrowing 
powers in the hands of the Central Government was strongly 
resisted by some of the financial interests in the provinces 
and a certain political party, who endeavored to assert their 
right to independent financial operations and loans raised 
on provincial securities. This and other causes precipitated 
the Second Revolution on July 18, 191 3. 

Since the First Revolution merchants and others had 
suffered bitterly by the disorganization of commerce and 

\/ihe unsettled state of the country and had hoped for the 
permanent removal of disaffection, a chance to return to 
security, and a distinct promise of the general resumption 
of business. With the disappearance of the Manchu dynasty 
as a common ground of opposition the Second Revolution 

1 Cf. infra, p. 159. 



oej] NATIONALIZATION OF RAILWAYS 123 

lacked support from the people and was soon suppressed. 
The result was the dissolution of the Kwok Min Tang 1 \/ 
(the Young China Part}-) and the Parliament, and the for- 
mation of the Central Administrative Conference. The per- 
iod between the First Revolution and the Second Revolu- 
tion may be called a period of two years' conflict betweenv/^ 
the different political parties and be tween the Cent ral Guv- 
ernment and the provinicial interests — a period of practical 
deadlock-—- 

With the inauguration of the Republic after the Second 
Revolution the Central Government was left without funds 
and was confronted with immense liabilities. The pro- 
vinces failed to contribute their quota of revenue. The 
Government was thus forced to turn its attention to foreign 
loans in order to eke out its existence. The Crisp Loan, 
the Reorganization Loan, and several small loans were thus 
contracted. 

In the meantime the Government struggled to solidify 
its position. After exerting much energy and overcoming 
much trouble it succeeded in centralizing the financial con- 
trol to a certain extent. The Minister then took an im- 
portant step in defining clearly the central and provincial 
powers with regard to financial control in a set of instruc- 
tions x issued to the provinces. The essential instructions 
are as follows : 

1. Xo province will be allowed to contract foreign loans 
after June next year (1914). 

2. With the exception of industrial loans, the amount of a 
loan should not exceed $3,000,000 (Mex.). 

3. The proceeds of the loans should be used only for mili- 
tary expenses, returning overdue loans or paying other un- 
avoidable expenses. The ordinary administrative expenses 

■ Eastern Review, Nov., 1913, P- 211. 



124 RAILWAY PROBLEMS IN CHINA [352 

should be defrayed by the revenues of the province, and no 
loan should be used for administrative purposes. 

4. Before concluding a loan, the province should first report 
to the Ministry of Finance the source from which the repay- 
ment of the loan is to be made. 

5. No revenue which is included in the class of national tax 
should be used as security for loans by the provinces. 

6. Before signing a loan agreement, the draft of the agree- 
ment should be approved by the Ministry of Finance. 

7. A comprehensive and detailed statement of the expendi- 
ture of every loan should be submitted to the Ministry of 
Finance. 

Also, in view of the troubles involved in the foreign loans 
raised by the private entrepreneurs, such as in the cases of 
the Kiangsu Railway Company, 1 the Hanyihping 2 and other 
loans, the Government has drawn up a new set of regula- 
tions governing the conditions under which merchants may 
contract foreign loans. The regulations 3 issued in March, 
1914, are as follows: 

1. Any merchant who borrows foreign loans to undertake 
business, no matter whether the loan is a new one or has been 
discussed in the past, should first make a report to the Min- 
istry to whose control his occupation is subject. 

2. When circumstances necessitate the merchant making a 
foreign loan, he should first make a report to the Ministry 
stating its use and the source from which he can derive money 
for its repayment. 

1 Cf. infra, p. 128. 

s The Hanyihping Co., i. e., Hanyang Steel Works, Taiyih Iron Mines 
and the Pinghsiang Colliery, had arranged a loan of Yen 15,000,000 
with Japanese financiers. Sheng Hsuan-huai, who fled to Japan when 
the first revolution broke out, was accused of negotiating for the dis- 
posal of his shares to the Japanese. Thus a storm of protest arose. 
The Government was dragged in and asked to take over the enterprise. 

3 Far Eastern Review, March, 1914, p. 395. 



353] NATIONALIZATION OF RAILWAYS I2 z ) 

3. Merchants who have been allowed by the Ministry to 
make foreign loans should submit the agreement for such 
loans to the Ministry for its approval. Xo agreement should 
be considered as valid if it is signed before the Ministry ap- 
proves it. 

4. Before the signing of an agreement, the merchant should 
first inform the Ministry, which will send a delegate to witness 
the signing, and no loan agreements shall be considered as valid 
unless they have been subjected to the above processes. 

The Government has also issued a lengthy statement * 
dealing with its different schemes for financial relief, its 
policy towards military administration, industrial develop- 
ment, etc. In addition, its policy towards the means of 
communication was finally set forth as follows : 

We will be careful regarding State enterprises. The Gov- 
ernment will only undertake such projects as must be man- 
aged by the State, while other business enterprises will be left 
to the people. The Government will not compete with them, 
but it will guide and encourage them . . . 

Railways, navigation, postal and telegraph administration 
are yet in the budding stage, and great possibility lies before 
them. We will draw a comprehensive scheme and decide upon 
the order of development according to the relative importance. 
The most important thing is to train men for the work. They 
should be equipped with technical education. We will wel- 
come the investment of foreign-capital in communication en- 
terprises, provided that there is no political significance. 
Special accounting methods will be employed by the Ministry 
of Communications because of the enormous amount of for- 
eign loans connected with the railways and the like. All 
accounts should be strictly supervised by the Government. . . . 

Since the inauguration of the Republic the public has 

1 English translation of text of statement, in Far Eastern Review. 
Nov., 1913, pp. 211-214. 



126 RAILWAY PROBLEMS IN CHINA [354 

realized the necessity of building more railways and the 
•'idea of inviting foreign capital for the development of rail- 
ways has become deeply rooted in the mind of the public. 
Hence the above statement regarding the railways. 

With the announcement of the policy regarding the rail- 
ways, measures were taken by the administrative authorities 
of the Ministry of Communications to unify the accounting 
and statistical systems for China's railways. This was 
regarded as a forward movement for more effective control 
/of all Government railways and as a first effort made to 
introduce all-round standardization of things connected 
with the railway. 

A conference was inaugurated with Mr. Yih Kung-chao, 
vice-Minister of the Ministry of Communications and 
Director-General of Railways, as chairman, and Dr. C. C. 
Wang as vice-chairman. Dr. Wang was the leading spirit 
of this movement. A number of the members of the Min- 
istry interested in accounting and the chief accountants of 
the different railways were then appointed as members of 
the Commission on the Unification of Railway Accounts and 
Statistics. Dr. Henry C. Adams, the expert in charge of 
railway statistics and accounts of the United States Gov- 
ernment, was engaged as Adviser. 

The success made by the Commission in overcoming the 
many peculiar difficulties arising from the different nation- 
alities and languages involved and the established habits 
and methods in keeping accounts of the different railways 
was hailed with praise from many quarters as a precedent 
for such an undertaking not only in China but also in other 
parts of the world. To illustrate the difficulties confront- 
ing the Commission, in the conference three languages, i. c, 
Chinese, English and French, had to be used for discussion. 

A distinct movement made by the Republican Govern- 
( y ment was the great allotment of railway mileage to foreign 



355] NATIONALIZATION OF RAILWAYS 127 

syndicates. Up to end of the year 191 3, the new Govern- 
ment has approved approximately 3S00 miles of railways to 
be constructed with foreign capital. The new lines ar- 
ranged for during the year are as follows : 

1. The Tatung-Chengtu Railway, 1,200 miles, granted to 
the Societe Generate de Belgiquc. 

2. The Pukow-Sinyang Railway, 350 miles, the Chinese 
Central Railway Co., Ltd., of London. 

3. The Shasi-Singyi Railway, 760 miles, contracted with 
Messrs. Pauling & Co., Ltd., London. 

4. The Tsinan-Shunteh & Kaumi-Hanchwang Railways, 300 
miles, conceded to German syndicate. 

5. South Manchuria Ry. Feeders, 1,200 miles, Japanese in- 
terests. 

The extent of new lines under construction during the year 
was as follows : 

1. The Hukuang System, 1,200 miles, Four Nations' Group. 

2. The Kalgan-Tatung Railway, 100 miles, practically com- 
pleted by the Government itself. 

3. The Lung-Tsing-U-Hai Ry., 1,500 miles, Franco-Belgian 
interests. 

The above concessions show that the Government has 
pursued a policy intended jtoco-prdinate its existing railway 
systems and to bind them by judicious connections into as 
complete and effective an organ of communication and de- 
velopment as indicated in the statement of its general policy. 
In addition to these concessions the Ministry has also drawn 
up plans for the construction of all important lines. It 
has been estimated that the mileage of these proposed lines 
is many times longer than before. 

The new Government has also determined to take up 
what the Manchus have left undone, i. c, to nationalize all 



128 RAILWAY PROBLEMS IN CHINA [ 35 £ 

j) rovinicial railways w hich form sections of the future trunk 
s)-stenM 1 __J\^Sh«igTpoiicy*was to be pursued. The first 
step made was to take over the Shanghai-Hangchow-Ningpo 
Railway. 

The Shanghai-Hangclwz^-Xincjpo Raikcayj As pointed 
out in Chapter VI, the management of this road was un- 
satisfactory and the late Government had already made an 
attempt to nationalize it in 19 10. When the Revolution 
Government at Nanking was in dire need of money the 
Kiangsu Railway Company, for patriotic reasons, signed 
a loan agreement with Okuma & Company, one of the 
largest Japanese engineering concerns, to advance Tls. 
3,000,000, at par, at 8 per cent interest, secured on the 
revenues and physical property of the Kiangsu section of the 
line. Owing to the protest raised by the British Govern- 
ment, which pointed out that the trouble between the Rail- 
way Company and the British syndicate still remained un- 
settled and that Japan's participation in its loan would com- 
plicate matters, the Japanese Government accepted the 
British proposition of suspending the payment of the sec- 
ond and subsequent instalments of the loan. 

In 1 9 1 3, the people of Kiangsu, realizing that they could 
not secure anv return on their investments unless a change 
was made, consented to hand over their property, upon a 
fair valuation of the Chiaotung Pu, 1 to be managed as a 
State concern, thus hoping to regain some of their money. 
The acquirement of the Kiangsu section of the railroad by 
the Government made the sale of the Chekiang section of 
the line inevitable. On March 1, 1914, the proprietors of 
the Chekiang Railway held a meeting at Hangchow and 
agreed by a large majority to sell their shares to the 
Government. 

1 New name for the Ministry of Communications, changed from the 
old name, Yu Chuan Pu, after the inauguration of the Republic. 



357] NATIONALIZATION OF RAILWAYS 129 

; ~ TheHukuang Railways . By the end of 191 2 at a con- 
ference held by General Li Yuan-hung. Civil Governor 
Liu of Hupeh and the managers of these lines, it was de- 
cided that the Szechuan-Hankow and the Canton-Hankow 
(the Hupeh and Hunan section) should be nationalized. 
It was arranged that all the materials for the construction 
of the railways purchased by the private capitalists should 
be redeemed by the Government. The funds now reserved 
by the " People's Railway Company " of Hunan and 
Hupeh may be invested in other commercial enterprises or 
in constructing the tributary lines in connection with the 
trunk railways. In Chengtu public meetings were held by 
the shareholders of the Szechuan-Hankow road. The 
shareholders decided to utilize their funds for the construc- 
tion of lines in connection w T ith the main lines. 

After some negotiations between the representatives of 
the provinces concerned and the Ministry of Communica- 
tions the policy of government ownership of the two lines 
was agreed upon. Terms acceptable to both parties con- 
cerned were arranged. In the spring of 19 13, agreements 
of transfer x were made between the railway companies and 
the Ministry of Communications regarding the taking-over 
of the two roads by the Ministry. 

The Lot ung an d the Tungfiii Railways: The same fate 
fell upon these two roads. The private companies organ- 
ized to construct them have been in existence for several 
years, but very slow progress has been made in the con- 
struction work. The Tungpu line runs from Tatungfu in 
Northern Shansi to Puchowfu in the extreme south of the 
province. The Ministry of Communications has contem- 
plated the transfer of this line to State management, and 
its incorporation into a big trunk system. 

iFor full text of the transfer agreement for Szechuan-IIanknw 
R. R., see Far Eastern Review, March, 1913. 



130 RAILWAY PROBLEMS IN CHINA [358 

The Lotting line forms a section of the Lung-Tsing-U- 
Hai line, the Northern latitudinal trunk line. 1 In the con- 
tract made on September 24, 191 2, with La Compagnie 
Generate dc Chemins de Fer et de Tramway en Chine, 
Article IV, section 2 provides that " the Chinese Govern- 
ment obligates itself to purchase, equip and put into opera- 
tion the Lotting section, granted to the provincial company 
of Honan, so that the company may at an opportune time 
take all necessary steps in order to prosecute without delay 
and hindrances the work outlined in the contract to the 
West." At the end of the year 1913, the Lotting railway 
was transferred from private ownership to Government 
control and the Government is earnestly considering the 
completion of this line. 

The Fukien Railway. In 19 14, less than twenty miles 
of the Fukien railway was open to traffic, and the financial 
condition of the company was hopeless. As the people 
of the province objected to the levying of additional taxes 
for the construction of the line, the company requested the 
Government to nationalize the line. The Ministry of Com- 
munications thereupon sent deputies to Fukien to take over 
the property. 

China's Trunk Lines: At the end of the year 1912, the 
Ministry of Communications proposed four trunk lines, two 
running north and south and two running east and west, 
through the whole country. The proposal was submitted 
to the Cabinet and met with approval. The lines are as 
follows : 

I. The Central longitudinal line, beginning from Mon- 
golia, running through Peking and Shansi, turning south- 
ward to Hankow and thence to Chin Lung. Peking is to 
be the center of this line. 

1 Cf. infra, pp. 154-157. 



359] XATI0XAL1ZATI0N OF RAILWAYS 1^1 

II. The Eastern longitudinal line, beginning from Man- 
churia, passing through Chihli, Shantung, Kiangsu, and 
Chekiang and ultimately reaching Fukien and Kwangtung. 

III. The Northern latitudinal line, beginning from Hai- 
chow, passing through Honan and Tungkwan and Kansu 
and thence to Hi (there meeting the Central Asiatic Rail- 
way ?). 

IV. The Central latitudinal line, beginning at the Nan- 
king terminus of the Nanking-Shanghai Railway, passing 
through Wuchang, and entering Szechuan. 

When the above trunk-line system is compared with that 
outlined in Mr. Tsen Chen-hsuan's memorial presented to 
the Manchu Throne several years before there is a marked 
difference between the two. Mr. Tsen suggested a system 
with a particular center from which all trunk lines should 
radiate to different parts of the country — a star system — 
while the newly approved system is a rectangular system. 
Mr. Tsen's view was to make Peking the center of all trunk 
lines, which were to be four in number, viz. : 

I. The Northern trunk line, running from Peking 
through Kalgan, Kulun (Urga) and then to Kiachta in 
Mongolia. 

II. The Eastern trunk line, made by extending the 
present Peking-Mukden line to Aigun via Chiaonan and 
Tsitsihar in Manchuria. 

III. The Southern trunk line, beginning from Peking 
and ending at Canton via Hankow, i. e., the Peking-Canton 
line when completed. 

IV. The Western trunk line, formed by extending the 
line between Chengting (on the Peking-Hankow line) and 
Tayuan which will join with the Tungpu Railway, to the 
West via Tungkwan and Lanchow, and ultimately enter- 
ing Hi. 



CHAPTER IX 
International Cooperation 

In the last period we have shown that, with the exception 
of the Chinese Eastern Railway, the Shantung Railway 
and the French Yunnan Railway, which are of entirely 
political origin, nearly all railways in China were built by 
foreign loan contracts the terms of which are very dis- 
advantageous to China. Railway loan agreements con- 
cluded in the last period show that China has entrusted 
even the control and the expenditure of loan funds to for- 
eign syndicates, notwithstanding that ample security and 
high interest were provided for the loans. This was due 
iiV-the first place to the inexperience of the governmental 
authorities in railway matters in the very beginning; hence 
a bad precedent was established in case of the Peking- 
Newchwang Railway loan agreement. And in the second 
place this was due to the fact that spheres of interest were 
marked out and the foreign syndicates devoted their at- 
tention mostly to their respective spheres, hence at that time 
there was relatively less competition and rivalry for railway 
financing and construction in one another's spheres than in 
this period. 

When the people of China became a little more familiar 
with the railway business, when China's credit was improved 
more or less and when the foreigners became more inter- 
ested in Chinese affairs, trade and railway construction, the 
situation underwent a change. On the one hand, China 
could secure comparatively more liberal terms in contract- 
132 [360 



3 6i] INTERNATIONAL CO-OPERATION 133 

ing new loans, although not to the full extent accorded 
many other nations who raise foreign loans for railway 
construction. On the other hand, there was created a new 
financial arrangement — an arrangement between different 
nations To have several rival interests combined to finance 
and construct a certain line or several lines. This kind of 
combination is not only new in the history of old China 
but also perhaps in the history of railway financing in any 
other part of the world. It will be best to study a little 
more in detail the important cases of loan negotiations and 
contracts in this period so as to illuminate the above 
features. 

The Canton-Koidoon Railway * 

In 1898 the British and Chinese Corporation had secured 
the concession to build this line. The concessionaires had 
accomplished nothing until 1905 when the American China 
Development Company agreed to give up its concession for 
the construction of the Canton-Hankow line and to receive 
in compensation a sum of $6,750,000, U. S. C, a part of 
which was advanced by China through a British loan. This 
line is very important for maintaining Hongkong's position 
as distributing center for South China, because if a deep 
water harbor were established somewhere near Canton and 
in connection with the Canton-Hankow line, the traffic 
through Hongkong would be lessened by severe competition 
in the future. After the purchase of the American inter- 
ests this possibility of competition may be eliminated. 

Before the end of 1905, the Hongkong Government had 
proceeded to make arrangements to construct the British 
section of the line, a distance of 22 miles, through Kowloon 
(British leased territory). Meanwhile negotiations were 

1 Far Eastern Review, Nov., 1909, pp. 335-345; Kent, Ry. Ent. in 
China, pp. I73- J 76. 



I3 4 RAILWAY PROBLEMS IN CHINA [362 

carried 011 with the Peking Government to construct the 
Chinese section of the line, a distance of about 89 miles. 

The final agreement * between the Chinese Government 
and the British and Chinese Corporation was then signed 
on March 7, 1907, for a 5 per cent gold loan of £ 1,500,000, 
issued at 94. The general rules for the supply of materials 
are similar to those stipulated for the Shanghai-Nanking 
Railway, with the exception that a lump sum of £ 35,000, 
instead of 5 per cent commission on all purchases, was paid 
for all services rendered in the construction and equipment 
of the line. The loan is guaranteed by the Chinese Gov- 
ernment and secured on the railway when completed. The 
financial terms also are similar to those of the Shanghai- 
Nanking road. The life of the loan is thirty years, repay- 
able at 102^ after twelve and one-half years, or at par 
after twenty-five years. 

From the experience on the Shanghai- Nanking road 
where, owing to the control of expenditures resting entirely 
in the hands of the British chief engineer, the usual ex- 
travagance and unnecessary expenditures in management 
and construction had been the results, the Government 
authorities in negotiating this loan insisted upon some modi- 
fications of the Shanghai-Nanking terms and succeeded in 
securing for the Chinese Director-General participation in 
the supervision of the funds and in putting the Chinese 
Managing Director in the place of the Board of Control, 
i. e., the administration of the railway is thus invested in 
the Managing Director who is appointed by the Viceroy at 
Canton. With the Managing Director are associated a 
British chief engineer and a British chief accountant. These 
British employees are nominated and certified as competent 
for their posts by the Corporation and are then approved 

1 Kent, appendix F, no. 4. 



3 6 3] INTERNATIONAL CO-OPERATION 135 

by the Viceroy. If their services should prove unsatis- 
factory to the Viceroy, he would request the Corporation 
to dispense with their services and to nominate their suc- 
cessors, and, in the event he wished to remove them for 
good cause, it should be done in consultation with the 
Viceroy. 

All receipts and payments, authorized by the Managing 
Director, must be certified by the chief accountant, i. e., 
while the Chinese official has the privilege of handling the 
expenditures the accounts are supervised and checked by the 
British. It was arranged in this way because the English- 
men usually did not trust the Chinese to spend a foreign 
loan honestly. But later events show that the Englishmen 
themselves are experts of the " squeeze " and are not all 
trustworthy. 

After the construction work on the line had been started 
only a little more than a year, charges of graft and cor- 
ruption were directed against the chief accountant's depart- 
ment. When put on trial the chief accountant was con- 
victed on the charge of embezzling an enormous sum of 
money. 

Notwithstanding, this loan agreement has, in practice, 
been found more satisfactory than all the preceding ones 
contracted with the British and there has been complete 
harmony based on mutual confidence between the two 
parties. 

The Tientsin-Pukow Railway 1 

In 1898 Germany and Great Britain had secured jointly 
a concession for constructing this line. In May, 1899, the 
preliminary negotiations for financing, constructing, equip- 

1 Kent, pp. 148-153, and appendix E for preliminary agreement. Far 
Eastern Review, pp. 309-310, and 329-334 of Nov., 1009, copy. For 
final agreement (English translation), see supplement of same issue. 



1 36 RAILWAY PROBLEMS IN CHINA [364 

ping and operating the line were completed. In 1900, the 
Boxer Uprising suspended further progress. In June, 1902, 
negotiations were again resumed and on January 13, 1908, 
the final loan agreement was concluded. At the time of 
negotiating the final loan contract China's credit was im- 
proved more or less. The Government authorities, who 
determined to reassert a little of China's dignity, insisted 
on more effective " control " of the line. As there was 
rivalry and competition between the German and British 
syndicates for the loan, China succeeded in making some 
important modifications of the old loan terms and in estab- 
lishing a more favorable precedent for future loans. 

This loan is known as the Imperial Chinese Government 
5 per cent Tientsin-Pukow Railway Loan. The amount of 
the loan was fixed at £ 5,000,000 to be issued in two instal- 
ments. The life of the loan is thirty years, amortization 
to commence after ten years in half-yearly installments at 
a premium of 2^2 points (£1023/2 on every £100 bond), 
and at par after twenty years. The first issue was placed 
on the market in March, 1908, at 98^4, for £3,000,000, of 
which £1,890,000 was raised through the Deutsch-Asiatische 
Bank in Germany for the German section of 401 miles and 
£1,110,000 was raised through the Chinese Central Rail- 
ways, Ltd., in London for the construction of the British 
section of 235 miles. Instead of paying the usual 20 
per cent of the profits of the railway, China paid a lump 
sum of £200,000 to the Anglo-German Syndicate out of 
the first issue of the bonds. 

The loan was oversubscribed in Europe for several times 
its value. A considerable portion was also subscribed for 
by Chinese in Peking and Tientsin. An amount of £260,000 
in bonds exclusive of those purchased by private native 
investors is also held by the provincial governments of 
Chihli, Shantung, Kiangsu and Anhui. The price to the 



365] INTERNATIONAL CO-OPERATION i^y 

Government for the first floating was 93, and the second 
was the actual rate of issue to the public, less 5 l / 2 points 
commission to the financial syndicates. 

The loan service is met from the earnings of the road. 
The loan is secured on the Likins and internal provincial 
revenues of Chihli, to the amount of 1,200,000 Haikwan 
Taels per year, of Shantung, 1,600,000 Hn. Tls. per year, 
the Nanking Likin of 900,000 Tls. per year, and the Huaian 
Native Customs in Kiangsu of 100,000 Tls. per year. At 
the same time the loan is guaranteed by the Central Govern- 
ment. The railway itself is not mortgaged as collateral se- 
curity as in the case of previous lines. It was for the first 
time stipulated in a foreign loan agreement that, in case of 
default on the loan service, the hypothetical revenues were 
to be administered by the Maritime Customs Service. 

The signing of this agreement marked the square deal 
for the first time in the history of railway loans in China, 
and the first recognition by the foreign banks of China's 
right to participate in the control of loan funds and con- 
struction. The old principle of joint management was K y // 
abandoned. The construction and control of the road rest 
entirely in the Government. 

China has the power to appoint experienced British and 
German chief engineers, acceptable to the Anglo-German 
syndicate. These engineers are subordinate to the control 
of the Chinese Managing Directors of the two sections re- 
spectively. In the employment and dismissal of the techni- 
cal employees of the line, the Managing Director and the 
chief engineer have to concur and submit their differences 
of opinion to the Director-General for decision. China also 
secured the privilege of appointing a European chief en- 
gineer to administer the entire line after construction, with- 
out reference to the syndicate. 

The Director-General retained in his hands complete 



138 RAILWAY PROBLEMS IN CHINA [366 

control of the funds derived from the loan, subject, how- 
ever, to the condition that the loan funds should be drawn 
upon a requisition signed by the managing directors who 
were to certify for what the money was required. There 
was no provision for the services of a foreign accountant 
to certify payments, as in the case of the other loans. A 
modern system of accounting was, however, provided for, 
subject to inspection at intervals by a representative of the 
syndicate in order to verify the payments. The purchase 
of materials was also arranged for on a most favorable 
basis for China. 

The terms of this agreement were the most favorable 
ever conceded to China. It was only due to the rivalry and 
competition of the British and German interests that these 
well known " Tientsin-Pukow " terms have come about. 
The Germans have taken all the credit of conceding these 
liberal terms to China and were loud in their praise of the 
generous terms, while the British financiers, who were usu- 
ally more or less selfish in dealing with China and forgot 
entirely the notorious case of the Canton-Kowloon road, 
held the opinion that Chinese official honesty was not trust- 
worthy and that the terms were too liberal and were not 
sufficient to guarantee the bondholders. 

When the agreement went into effect matters in the two 
sections of the road developed exactly contrary to what 
the respective foreign syndicates had thought. In the Ger- 
man section some discrepancies occurred in the accounts to 
the amount of Tls. 3,000,000 and other graft was discov- 
ered in the accounting department. This occurrence of 
frauds was a hard blow to the Tientsin-Pukow terms. The 
burden of this disgrace, however, can not be accepted in its 
full weight by the Chinese officials, because, owing to the 
carelessness, negligence and lack of knowledge of the rail- 
road business on the part of the Managing Director, the 



367] INTERNATIONAL CO-OPERATION 139 

Germans have an equal opportunity of conducting the busi- 
ness transactions, and contrary, to the provisions of the loan 
agreement the German chief engineer enjoyed equal control 
over the accounting department. The auditor, or rather the 
representative of the Anglo-German syndicate, should also 
be blamed for failing to discover these enormous pecula- 
tions in the accounts. 

The Managing Director and his confederates were, how- 
ever, removed and severely punished by the Government 
while the alleged German accomplices whom Chinese law- 
could not reach were free from prosecution, owing to the 
protests of their innocence by the German interests. The 
innocent Director-General, against whom no breath of sus- 
picion had been stirred, was dragged down by the fall of 
the Managing Director, because the Government held him 
responsible for the misdeeds of his subordinates. 

Aside from this dissension and fraud the operation of 
the " Tientsin-Pukow " terms was as a whole satisfactory. 
This was shown in the British section where the Managing 
Director was an able man and knew the railway business 
almost as thoroughly as the British chief engineer. He was 
able to secure low prices for materials which had formerly 
been purchased for other lines by foreign purchasing agents 
at much higher prices. He gave equal opportunities to all 
manufacturers, native and foreign, and awarded many 
contracts at lower prices to American and Continental firms 
rather than the British manufacturers whose interests 
the British engineer invariably advocated. Such an action 
on the part of the Managing Director naturally offended the 
Englishmen who wanted to monopolize the supply of ma- 
terials since the loan was raised in England : hence, friction 
often occurred during the construction of the road. Not- 
withstanding this, matters progressed very favorably. 

The German or northern section of the line was opened 



140 RAILWAY PROBLEMS IN CHINA [368 

to traffic in February, 1912; the British or southern section 
was opened in June, 191 2. This road traverses an ex- 
ceedingly rich district, and is already making itself felt in 
the transportation of cargo as a formidable competitor of 
the old Grand Canal route. The passenger traffic of the 
Peking-Hankow line from Peking and Tientsin to the lower 
Yangtsze Valley is also more or less diverted to this road. 
At the present these are the only two lines in China which 
may be said to have to face the problem of competition as 
found in other countries. The effect of the Tientsin- 
Pukow road on the development of the trade of Shanghai, 
as the great commercial center for Central and North China, 
and of Pukow and Hankow, as interior distributing centers 
of the Republic, is a matter of considerable interest which 
will be more seriously watched in the future. 

The Huknang Railways * 
(Canton-Hankow and Hankow-Szechuan Railways) 

In the last chapter we studied the fight for the con- 
trol of these lines between the provinces concerned and 
the Central Government. Here we will take up the loan 
negotiations between China and the interested banking 
groups of the different Powers, and the quarrel among the 
Powers themselves regarding these important lines. We 
shall also see how a compromise and a co-operation of inter- 
national finance — a great financial combination in China — 
were effected. 

On October 1, 1903, Great Britain succeeded in securing 
the right of construction for her own and American capi- 
talists. An agreement signed by Prince Ching with the 

1 Far Eastern Review, Apr., 1910, pp. 523-8; June, 191 1, passim ; Aug., 
191 1, pp. 82-88; Jan., 1914, pp. 290-307. Bland, Recent Events and Pres- 
ent Policies in China (Philadelphia, 1912), pp. 322-5; China Year Book, 
1 91 4, pp. 233-5. 



369] INTERNATIONAL CO-OPERATION i 4I 

British Minister Sir Ernest Satow stipulated that " if China 
desires to construct a Hankow-Szechuan line and her capi- 
tal is insufficient, she will obtain all necessary foreign capi- 
tal from Great Britain or the United States." And when 
the Hongkong Government made a loan to China for the 
redemption of the Canton-Hankow concession from 
America, Great Britain also secured a preferential right 
to supply both money and material for the construction 
of the Canton-Hankow line. 

In the early part of the year 1909, China decided to raise 
a loan for the construction of the above two lines. In ac- 
cordance with her agreement with Great Britain, China 
extended the first chance to the British and Chinese Cor- 
poration to supply the loan — the corporation being an amal- 
gamation of British and French interests since 1905. 1 
Meanwhile German interests expressed a desire to partici- 
pate in the loan. On March 1, 1909, a tripartite agreement 
was arranged in Paris after a stormy conference. On April 
2, an American banking group (the China Investment and 
Construction Company) also formally proposed American 
participation in the loan by addressing the British and 
Chinese Corporation. 

During the negotiations, Mr. J. O. P. Bland, the represen- 
tative of the British syndicate, determined to have the 
" Canton-Kowloon " terms applied to the agreement, while 
Grand Councillor Chang Chih-tung insisted that " Tientsin- 
Pukow " terms should be stipulated. To this Mr. Bland 
refused to accede, and negotiations were abruptly broken 
off by the Grand Councillor because of the British arr< »g- 
ance. Some German bankers then stepped in and offered t 1 

1 Agreement between certain British corporations, a group of I 
capitalists and Chinese Central Rys., Ltd., for the construction of the 
Sinyang-Pukow and Hankow-Chengtu Rys., signed on Oct. 2, 1905 ; see 
Far Eastern Review, Jan., 1914, pp. 3°5"307- 



I4 2 RAILWAY PROBLEMS IN CHINA [370 

accept the " Tientsin- Pukow " terms and at the same time 
secured some special privileges over the Canton-Hankow 
Railway. Immediately a preliminary agreement was made 
to float a loan for the construction of the Canton-Hankow 
line. Thus German influence was let into the Yangtsze 
Valley which Great Britain has struggled hard to maintain 
as her special sphere of interest for many years. The 
British Legation in Peking at once lodged a strong protest 
with the Grand Councillor, accusing him of breach of 
promise. To this the Grand Councillor replied that since 
the British syndicate refused to accept the terms similar 
to those of the Germans their preferential rights had been 
canceled. The British Government, not satisfied with this 
explanation, maintained that the pledge was made to the 
British Government and not to the British syndicate, and 
that the British Minister should be notified so that other 
British capitalists might take up the loan. In consequence 
of this the future activity of the British and Chinese Cor- 
poration in China was destroyed, because, during the sub- 
sequent loan negotiations in Peking, China refused to deal 
with the representative of that corporation. Mr. Bland, 
who acted for a good many long years in the Chinese drama, 
" lost his face " and was compelled to retire from the " flow- 
ery " stage. The Hongkong and Shanghai Banking Cor- 
poration took over the British interests in China. 

At the same time the people of the nations concerned also 
accused one another. Diplomatic protests and recrimin- 
ations then followed. The bankers, however, found a 
means of solving the complicated problem. They held a 
conference in Berlin. As a result of the conference a 
compromise was brought about to the effect that the Hong- 
kong and Shanghai Banking Corporation and its French 
associates agreed to combine with the German Group to 
negotiate a loan to cover not only the Hankow-Canton road 



371 ] INTERNATIONAL CO-OPERATION ^3 

but also the Hankow-Szechuan line. An inter-group 
agreement was concluded under which the German Group, 
after having agreed to withdraw its claim over the Canton- 
Hankow line which was to be constructed by an Anglo- 
French Group with a British chief engineer, secured the 
right to construct a railroad from Hankow to the border 
of the Province of Szechuan with a German chief engineer. 
Having reached this compromise the tripartite groups con- 
cluded with the Grand Councillor on June 6, 1909, a pre- 
liminary agreement for a loan of £5,500,000, accepting the 
terms embodied in the Tientsin-Pukow Agreement. 

On June 10, 1909, when this became known, the Ameri- 
can Legation in Peking forwarded a protest to the Grand 
Councillor against the ratification of the preliminary agree- 
ment on the ground that an American syndicate had secured 
an original promise from the Chinese Government that " in 
the event of the floating of foreign loans for the Hupeh 
section of the Szechuan road China will first consult America 
and Great Britain." Protest was also made against the 
items in the proposed loan agreement giving preference to 
German, British and French materials. 

At the same time the American Ambassador in London 
also called the attention of the British Foreign Office to the 
fact that Americans had the right and the desire to partici- 
pate in the loan and that in Article III of the agreement, 1 
signed on October 2, 1905, between the British and French 
groups provision was made for American participa 
According to the same agreement a period of twelve months 
from the date of signature was named as the time within 
which American capitalists might notify the British and 
French Groups of their desire to share in their activities. 
Meanwhile, a number of American capitalists, mostly Wall 
Street bankers headed by J. P. Morgan & Company, formed 

1 Far Eastern Review, op. cit. 



I4 4 RAILWAY PROBLEMS IN CHINA [372 

a powerful group with the object of backing up the United 
States Government's attitude x toward the loan and entered 
the field for participation in the investment in China. 

The Peking authorities found it hard to disregard the 
American claim and felt, also, that it was an advantage to 
China to admit the American interests. But as the pre- 
liminary agreement had already been signed it was very 
difficult to change any of the conditions without arousing 
storms of protest from the Governments of the tripartite 
groups. In fact, the United States had not definitely in- 
formed China of her desire nor showed any determined 
eagerness to co-operate in this loan during its negotia- 
tion, until the European syndicates had already settled the 
trouble amongst themselves and had cleared up their differ- 
ences with China. 2 The American Charge d' Affaires, Mr. 

1 The United States' attitude towards the loan was explained in an 
official statement given out from Washington, D. C, in Oct., 1909. A 
part of the text of the statement says : "The Government of the United 
States is much gratified at the formation of a powerful and respon- 
sible American financial group to enter the important field of invest- 
ment in China, and is giving to the enterprise that cordial support which 
the Department of State stands ready to give all legitimate and bene- 
ficial American commercial and financial undertakings in foreign coun- 
tries. Such undertakings are to be encouraged because of direct benefit 
to American commerce and to international' relations. . . ." See Far 
Eastern Review, Nov., 1909, p. 317. This attitude was regarded as the 
outcome of the so-called " Dollar Diplomacy " launched by Mr. Taf t. 
then President of the United States, and Mr. Knox, then Secretary of 
State. 

2 In the same official statement issued in Oct., 1909, from Washington, 
the United States Government confessed that: "Although American 
capitalists did not, owing to the financial conditions in this country, find 
it convenient to accept the British invitation to cooperate with the 
British and French groups in endeavoring to persuade China to make 
the foreign loan for the construction of the Hankow-Szechuan line, it 
is fortunate that before the negotiations were terminated the organiza- 
tion of this powerful American syndicate has made it possible for 
China to fulfil her agreement and grant to the U. S. participation in 
this loan in accordance with the Waiwupu's promise of 1904." Ibid. 



373] INTERNATIONAL CO-OPERATION I45 

Fletcher, was, however, very energetic in making representa- 
tion after representation to the Waiwupu of China's obli- 
gations and of his Government's determined attitude to- 
ward this loan. 

On the other hand, the European diplomats demanded 
an early ratification of the loan by bringing pressure upon 
the Grand Councillor to memorialize the Throne. Among 
them the British Minister was especially emphatic in his 
demands. Mr. Fletcher warned the British Minister that 
his action would disturb the cordial relations between the 
United States and Great Britain. The newspapers of 
Europe and America then made a great outcry, each siding 
with their own representative. The Europeans accused the 
United States of having allowed the European countries 
to do all the hard work, then at the last moment of having 
claimed a share in the reward of their efforts and of having 
delayed the negotiations by insisting on participation ; while 
the United States maintained that she was first in the field 
for this particular loan and had on three separate occasions 
between January and April of the year 1909 pointed out 
to British banking interests that the American banking 
group had a desire to co-operate in this loan, and that on 
each occasion the proffered co-operation had been declined 
by them, although German and French co-operation was 
accepted shortly thereafter. 

China, however, realized the seriousness of the situation. 
She assured the American Legation of her postponement 
of the final ratification of the agreement. The Germans 
became at once very energetic in using every means to bring 
about the ratification of the contract. The Washington 
Administration under Mr. Taft then took drastic action 
by sending a presidential message to the Prince Regent of 
China emphasizing American rights, employing however 
only friendly terms. The Waiwupu was then instructed 



I4 6 RAILWAY PROBLEMS IN CHINA [374 

to open negotiation with Mr. Fletcher for the admission 
of American capital on equal terms with the Europeans. 
On August 17, 1909, admission of American capital was 
definitely accepted and the loan was increased from 
£5,500,000 to £6,000,000, the four groups to take a quarter 
each. This increase meant that China was forced to bor- 
row £500,000 more in order to admit the United States. 

When it seemed that everything was settled additional 
troubles arose. Russia and Japan, who have no surplus 
capital for investment in foreign lands, also insisted upon 
a share in the loan and urged a further increase of the loan 
to accommodate them. This caused another diplomatic 
war lasting, however, only a short time. 

Furthermore, negotiations among the four groups who 
had already secured the concession struck another obstacle 
and from that there resulted a further delay in concluding 
the final agreement. The competing countries experienced 
great difficulty in arranging the question as to the amount 
of line each would control and the appointment of en- 
gineers who could influence, in favor of their respective 
countries, the purchase of all the railroad supplies needed, 
thereby originating the channel of future commerce. The 
Germans were accused of not being willing to yield suffi- 
ciently to the other Europeans to equalize the common loss 
involved by the American participation. On the other hand, 
the British were accused by the Germans and French of 
delaying the loan for petty gains. 

Somehow, however, these two points of dispute, i. e., 
the allotment of the line mileage and the appointment of 
engineers, were settled. A third question came up — the 
question of appointing purchasing agents. The American 
Group, knowing the national prejudices of the European 
engineers in awarding tenders and the past record of the 
British and Chinese Corporation and the Deutsch-Asiatische 



375] INTERNATIONAL CO-OPERATION 147 

Bank in placing orders for materials regardless of the pro- 
vision of the loan agreements, endeavored to secure Ameri- 
can participation in the appointment of a purchasing agent 
who would guarantee a square deal to American manufac- 
turers. Owing to the refusal of the British and German 
Groups to permit any change in the wording of Clause 18 
of the original agreement, which named the British and 
Chinese Corporation and the Deutsch-Asiatische Bank as 
purchasing agents for all the lines, the negotiations between 
the four financial groups dragged along for several months 
more. Finally the representative of the American Group 
was induced to yield. He waived the right to appoint an 
American purchasing agent on the condition that the British 
and the German purchasing agents should write an official 
letter obligating themselves to an impartial awarding of 
tenders. Thus the exclusive purchasing rights for the 
entire system including the American section were con- 
ceded to the Deutsch-Asiatische Bank and the British and 
Chinese Corporation. At a meeting held in Paris on May 
23, 1910, between the representatives of the four groups, 
an inter-group agreement was signed providing for " the 
receipt of or an absolute basis of equality of tenders from 
British, German, French and American manufacturers." a 
At the same meeting it was also agreed that the four groups 
should participate equally in the purchasing commission, 
the Deutsch-Asiatische Bank and the British and Chinese 
Corporation receiving one per cent as compensation for the 
actual services rendered, and the other 4 per cent to be 
equally divided between the four groups. Thus the con- 
tention between the several leading financial groups as well 
as their respective governments was brought to an end. 

1 For full text of the agreement, see Far Eastern Rez'iew, vol. viii, 
no. 3, P- 83. 



I4 8 RAILWAY PROBLEMS IN CHINA [376 

During the period of this contention, the seriousness of 
the international turmoils, coupled with the ridiculous pre- 
tensions of Russia and Japan, had roused the fears of 
China's loyal children who suspected that there was cruel 
design behind the loan. The result was a popular opposi- 
tion to placing the " sovereign rights " of the nation in the 
hands of foreigners. 

After all these many difficulties had been overcome the 
final agreement * was signed on May 20, 191 1, between Mr. 
Sheng Hsuan-huai, the Minister of Posts and Communi- 
cations and the representatives of the Four Nations' Groups. 
The world-famous loan is called " The Imperial Chinese 
Government Five Per Cent Hukuang Railway Sinking Fund 
Gold Loan of 191 1." According to the agreement a loan 
of £6,000,000 was floated to : 

1. Redeem certain hitherto unredeemed gold bonds to 
the total par value of gold $2,222,000, issued by the Ameri- 
can China Development Company on behalf of the Im- 
perial Chinese Government. 

2. (a) Construct a Government railway main line from 
Wuchang, the capital of the Hupeh province, through Yo- 
chow and Changsha, the capital of Hunan province, to a 
point in the district of Yichang-hsien, in the prefecture of 
Chenchow, of the southern boundary of Hunan, connecting 
with the Kwangtung section of the Canton-Hankow railway 
line, the total length of this line, to be known as the " Hupeh- 
Hunan section of the Canton-Hankow railway line," being 
an estimated distance of 1,800 Chinese li, or 900 kilometres; 
(b) and a Government railway main line from a point at 
or near Kuangshui in the Province of Hupeh, connecting 
with the Peking-Hankow railway line and passing through 

1 For full text of the agreement, see Supplement to the Far Eastern 
Revieiv, Aug., 191 1. 



37j] INTERNATIONAL CO-OPERATION 149 

Hsiang-yang. and Chingmenchow to Ichang, an estimated 
distance of 600 Chinese li, or 300 kilometres, — this latter 
section of the main line having been added in substitution 
for the branch line from Chingmenchow to Hanyang ori- 
ginally agreed upon, — the total length of this main line, 
hereafter known as the " Hupeh section of the Szechuan- 
Hankow railway line " being about 1,800 Chinese li, or 
900 kilometres. 

The agreement provides that after the deduction of the 
amount required for the redemption of the gold bonds the 
balance of the loan shall be solely devoted both to the con- 
struction of the aforesaid railway lines, including the pur- 
chase of land, rolling stock and other equipment, and also 
to the working of the lines, as well as to the payment of 
interest on the loan during the period of construction, which 
is estimated at three years from the actual beginning of the 
work, a longer period, however, being allowed for the 
completion of the section from Ichang to Kweichowfu in 
consideration of the engineering difficulties to be en- 
countered. 

In the agreement it was also stipulated that the security 
for the loan shall be the general Likin of Hupeh province, 
amounting to Tls. 2.000,000 per year; the Hupeh additional 
salt tax for river defence, amounting to Tls. 400,000 per 
year; the Hupeh new additional 2 cash salt tax of Septem- 
ber. 1908. amounting to Tls. 250,000 per year; the Hupeh 
collection of Hukuang inter-provincial tax on imported rice, 
to the amount of Tls. 250.000 per year ; the general Likin 
of Hunan, amounting to Tls. 2,000,000 per year; the Hunan 
Salt Commissioner's Treasury regular salt Likin. to the 
amount of Tls. 250,000 per year; in all amounting to Tls. 
5,200,000 per year. In case of default in the payment of 
principal or interest of the loan, Likin and other suitable 
internal revenues of the Provinces of Hupeh and Hunan 



I50 RAILWAY PROBLEMS IN CHINA [378 

sufficient to provide the above-stated amount shall be trans- 
ferred to, and administered by, the Imperial Maritime 
Customs in the interest of the bondholders. 

The duration of the loan is forty years. Yearly amorti- 
zation in half-yearly instalments shall commence after ten 
years out of the revenues of the line, or such other re- 
venues as the Chinese Government may think lit to use for 
the purpose. The whole outstanding amount of the loan 
may also be redeemed after ten years from the date of the 
loan by paying a 2^2 per cent premium on the face value of 
the bonds, and after the lapse of seventeen years without 
premium. 

The price of the bonds to China was 95 per cent of their 
nominal value with 5 per cent interest. 

The construction and control of the railway lines are 
entirely and exclusively vested in the Chinese Government, 
in addition to the power of appointing a British chief en- 
gineer for the Hupeh-Hunan section of the Canton-Hankow 
railway line from Wuchang to Yichanghsien ; a German 
chief engineer for the Kuangshui-Ichang section of the 
Szechuan-Hankow line; and an American chief engineer 
for the section of that line from Ichang to Kweichowfu. 
All these engineers must be fully qualified and acceptable 
to the banks concerned. 

The supervision of expenditures and the control of the 
loan funds were stipulated in a manner similar to the 
Tientsin-Pukow terms. 

After the signing of the agreement, as we have seen, a 
revolution broke out. which, with its aftermath, produced 
a great change in the economic condition of the country 
and the value of the securities already pledged. The ma- 
chinery of tax collection was dislocated. Likin collections 
fell off and other revenues pledged also suffered. The 
credit of the native banks was seriously affected. Progress 



379] INTERNATIONAL CO-OPERATION I5I 

on the construction work was completely blocked. These 
and other factors persuaded the foreign bankers to raise 
the question of reconsidering some of the points in the 
agreement. The bankers deemed it advisable to have the 
security revised, the arrangements for the banking of funds 
reconsidered, and a change instituted with regard to the 
auditors. Negotiations were re-opened with the Minister 
of Communications. The following points were raised and 
agreed upon : 1 

i. Additional security. The property and materials of 
the lines shall be specially given as provisional guarantee that 
the Likin will be unimpaired. 

2. Change in the methods of transfer of loan funds. In 
Article 14 of the agreement it was stipulated that the trans- 
ferred funds to the extent of one-half of the net balance 
of the loan proceeds might, at the discretion of the Ministry 
of Posts and Communications, be deposited with the Bank 
of Communications (Chiao-tung Bank) or with the Taching 
Government Bank, the Chinese Government declaring itself 
responsible for all the funds of the loan deposited with 
these banks. After the outbreak of the Revolution the 
above-mentioned banks and the Treasury were affected and 
both of the banks failed to do their usual business with the 
foreign banks. After much tedious negotiation it was 
decided that the loan funds should be deposited temporarily 
with the Deutsch-Asiatische Bank, the Hongkong and 
Shanghai Banking Corporation, the Banque de lTndo-Chine, 
and the International Bank in readiness to be drawn from 
time to time as required for the work until such time as 
either the Chiao-tung Bank or the Taching Bank has been 
reorganized as a State Bank of China and has established 
its credit, and business relations with foreign banks have 

1 Far Eastern Review, Mar., 1913, pp. 454-456. 



I5 2 RAILWAY PROBLEMS IN CHINA [380 

been mutually resumed. When such time comes the Gov- 
ernment may consult with the banking groups as to a re- 
vision of the methods of transfer laid down in Article 14 of 
the agreement by which the deposits of the proceeds of the 
loan funds were to be shared with the Chiao-tung Bank 
or the State Bank of China as agents. 

3. Change in the keeping of accounts. Article 14 of the 
agreement also set out that the accounts were to be kept in 
Chinese and English in accordance with accepted modern 
methods, and were to be supported by all necessary vouch- 
ers. Such accounts and vouchers were to be open for in- 
spection, at any time during the period of construction, by 
the auditors engaged by the banks. This was deemed by 
the banks to be an insufficient safeguard in view of the 
altered conditions in the country, and they pressed in addi- 
tion for the appointment of qualified accountants. The 
banks also deemed it advisable to have adequate provision 
made for the supervision of materials. It was ultimately 
decided that China should herself forthwith engage ex- 
perienced foreign accountants whose dismissal and appoint- 
ment would be entirely and exclusively controlled by the 
Chinese Government. It was also agreed that the Manag- 
ing Director and the engineers-in-chief of the respective 
sections of the Hukuang system should select a foreign 
engineer to be stationed at the store yards to control, super- 
vise and record the materials. In the event of damage, 
loss or misuse the Managing Director and the chief engineer 
shall be held responsible. 

Another difficulty encountered by the Central Govern- 
ment was its failure to secure a permanent Director-General 
for the lines. 1 This was, however, soon overcome. When 

1 General Huang Hsing and Mr. Tsen Chen-hsuan were appointed 
successively to the Post of Director-General of the system. Both of 



381] INTERNATIONAL CO-OPERATION ^3 

the Central Government was again strongly established in 
Peking and the country became pacified, construction work 
was pushed on in both the southern and the western lines. 

Special conferences were then held between the chief 
engineers and accountants of the lines and the banks, and 
regulations were drawn up and agreed to by the Ministry 
of Communications for the proper transference and dis- 
bursement of the loan fund and provisions taken against 
waste and misappropriation. 

By 19 1 3-19 14, an arrangement was made by the Chinese 
Government with the four banking groups for the extension 
of the Hupeh-Szechuan railway from Kweichowfu, via 
Chungking, to Chengtu, the capital of Szechuan province, 
involving the construction of over 500 miles of lines. It 
is understood that the financial arrangements will be equally 
shared by the four groups. Details had not yet been settled 
when the European War broke out. It is doubtless the 
French who will be more benefited by this extension 
than the other three nationalities, because it will be most 
probably the French Banking Group who will be given the 
right to appoint a chief engineer for this section of the 
Hankow-Szechuan road as they were not given that privi- 
lege in the previous agreement. It remains to be seen, 
however, how the present war will affect the whole system 
of the Hukuang roads. 

Since the conclusion of the Hukuang Railway Loan. 
China has contracted several other important railway loans, 
understood to be issued on practically the same conditions 
as the Tientsin-Pukow railway loan. The most significant 
of these are the Lung-Tsing-U-Hai Railway, the Sinyang- 
Pukow Railway and the Shasi-Shingyifu Railway loans. 

them were later implicated in the Second Revolution and fled the 
country. 



I5 4 RAILWAY PROBLEMS IN CHINA [382 

The Lang-Tsing-U-Hai Railway * 

In 1903 a loan contract for the construction of a railway 
from Kaifengfu to Honanfu (the Pienlo Railway) in the 
Province of Honan was made between the Chinese Govern- 
ment and the Compagnie Generate de Chemins de fer et de 
Tramways en Chine. 2 Article 23 stipulated : 

If the Compagnie finishes in good condition the work of the 
railway from Kaifengfu to Honanfu, strictly in accordance 
with all the clauses of the present contract, in this case and if 
the Chinese Government decides to extend the railway from 
Honanfu to Si-ngan-fu, the Director-General of the Imperial 
Chinese Government Railways obligates himself to agree to 
a preference and to give an option for the loan required for 
the enterprise to the Compagnie, conformably to the clauses 
and conditions of the present contract. 

It is well understood that if the Chinese Government is able 
to provide the necessary capital for the construction of the 
extension from its own resources or with funds raised by the 
subscription of its own nationals, the Compagnie may not 
benefit by this Article. 

After the Revolution the Chinese Government decided to 
extend the Pienlo Railway and to complete the Lotung line, 
which was to be nationalized, to Lanchowfu, capital of 
Kansuh province, in the West, and to Haichow or 
Suchowfu in the Kiangsu province, in the East. The Gov- 
ernment recognized that the Compagnie had completed in 
good condition the construction of the Pienlo railway and 
found that it was impossible to raise capital from native 
sources. It decided, therefore, to borrow foreign capital. 
The Ministry of Communications was then authorized by 

1 Far Eastern Review, May. 1913, p. 543 (for sketch of the road) ; 
May, 1914, p. 472; Jan., 1914, pp. 293-296. 
2 Cf. supra, p. 79. 



383] INTERNATIONAL CO-OPERATION 1^ 

the Presidential Order, dated August 31, 191 3. to negotiate 
a loan with the Compagnie Generale. But certain clauses 
of the 1903 contract offered serious difficulties, notably the 
clause admitting the Compagnie to a participation in the 
future profits of the line. After some negotiations a modi- 
fication was attained. It was agreed that certain compen- 
sation should be granted the Compagnie Generale for the 
abandonment of its rights previously acquired and the Gov- 
ernment received to itself in return all the rights and ad- 
vantages arising from the development of this line in its 
entirety. 

In September, 191 2, the loan contract 1 was signed by the 
Ministers of Communications and Finance on the one part, 
and the representative of the Compagnie Generale on the 
other. The authorized amount of the loan was to be 250,- 
000,000 francs, issued at 94, bearing interest at 5 per cent. 
The life of the loan is forty years. Repayment of capital 
and redemption at 102^2 commence ten years after the 
issue of the loan. During the construction the interest will 
be paid from the funds realized from the proceeds of the 
loan. The payment of interest and the repayment of the 
loan are guaranteed by the Chinese Government and by a 
special guarantee on the railway which constitutes a first 
lien on the road itself and its attachments. 

The Chinese Government will be in sole charge of the 
operation and direction of the railway. The Director- 
General and the chief engineer have absolute control over 
all expenditures and receipts of the railway. The work of 
constructing the railway will be performed under the su- 
preme direction of the Director-General. The Director- 
General and the Compagnie shall act together, conscien- 
tiously, in choosing an engineer-in-chief who shall be either 

1 Far Eastern Review, Jan., 1913, giving full text of the agreement. 



156 RAILWAY PROBLEMS IN CHINA [384 

Belgian or French, experienced and honest, and whose 
salary shall be fixed by the Director-General with the 
acquiescence of the Compagnie. All estimates and speci- 
fications and details of the works must be submitted in the 
first place to the Director-General for his approval. No 
Chinese or European employees can be engaged without the 
assent of the Director-General. The chief of general ac- 
counts, who must be of either French or Beligian national- 
ity, will fill at the same time (du bon emploi) the position 
of Auditor. He will be named by the Director-General and 
confirmed by the Compagnie. He will sign jointly with 
the representative of the Director-General all the checks 
drawn and all responsible documents. Each time that it 
becomes necessary to appoint technical employees for the 
railway, or to define their functions, or even to remove 
them, the Director-General must consult with the engineer- 
in-chief and act in accord with him. In case of disagree- 
ment the decision of the Minister of Communications will 
be final. The engineer-in-chief is to organize a European 
staff for the construction and submit it to the Director- 
General for his approbation — the staff comprising the chief 
of services, the chief of section, the chief of the account- 
ing bureau, etc., who are to be engaged by the Compagnie 
and placed under the order of the engineer-in-chief. 

The Compagnie will be charged during all the time of 
construction with the supplying of everything necessary 
for the construction and equipment of the line and for the 
needs of its operation except such Chinese supplies as can 
be procured at equal price and of equal quality. 

Although it is stated in the agreement that the Compagnie 
Generale is domiciled in Brussels, yet the French Yellow 
Book for 1900 x describes it as a Franco-Belgian syndicate, 
indicating that French interests predominated. The pro- 

1 Cf. supra, p. 75, foot-note. 



85] 



o°:> 



INTERNA TIONAL CO-OPERA TION 



157 






ject also met with hearty support from Russia because the 
line when completed if extended a little further westwards 
will connect with Russia's Asian system, and constitute a 
through trunk line from Central Asia to the heart of China 
and thence to the seacoast. Furthermore, the Banque 
Sino-Belge, for which M. de Vos acted as representative 
as well, has a close connection with the Russian banking 
group. 1 Therefore, it may be said that Russian interests 
have also probably played an important part in this deal. 

This line traverses the poorest and most desolate districts 
in China proper. Periodical floods often throw thousands 
of the people into starvation and disease. This railroad will 
enable the Government to ameliorate these conditions in 
the future. 

From the political and military point of view the line is 
of even more importance, because when completed it will 
enable China to control her north-western provinces more 
effectively and when extended in the future it will facilitate 
the colonization of Sinkiang by China. 

It will be of great commercial value because it will open 
a deep-water port somewhere between Tsingtau and Shang- 
hai, in_ord£r to command the great trade- routes from the 
central provinces to the sea, thus decreasing the dominating 
importance of Shanghai and Tsingtau which are under for- 
eign influence. 

The Sinyang-Pukozv Raihvay 

The preliminary agreement for the concession of this line 
was signed in 1899. Not until November 14, 19 13, was 
the final agreement 2 duly signed by the Ministers of Com- 

1 See Inter-Group Agreement for the Sextuple Reorganization Loan, 
in Far Eastern Review, Mar., 1913, pp. 439"44' i or China Year Book, 
1914, ch. on Finance. 

* For full text of agreement, see Far Eastern Review, Jan., 1914, pp. 
307-310. 






y 



158 RAILWAY PROBLEMS IN CHINA [386 

munications and Finance on the one part and the represen- 
tative of the Chinese Central Railways, Ltd., on the other 
part. The final agreement was signed as a purely British 
undertaking, providing for the appointment of British en- 
gineers and the purchase of materials from Great Britain. 
But as a large percentage of the shares * of the Chinese 
Central Railways, Ltd., are held in France and Belgium, 
French and Belgian partners are entitled to a division of the 
profits. The French and Belgians are, however, not ad- 
mitted to a participation in the allotment of purchase of 
materials and appointment of engineers, because by doing 
this openly the truth would be revealed to the Chinese Gov- 
ernment. Without informing China, by the 1905 inter- 
group agreement 2 the British have practically transferred 
to the French and the Belgians a part of their rights which 
the British Government had wrung from China as a penalty 
for signing the Peking-Hankow loan with the Belgians. 

The terms of this loan agreement practically follow the 
trend of the Tientsin-Pukow terms. The loan is called 
" The Chinese Government Five Per Cent Pukow-Sinyang 
Railway Loan." It provides for an amount of £3,000,000 
to construct a railway line from a point on the Tientsin- 
Pukow railway (southern section) to a point at or near 
Sinyang on the Peking-Hankow railway, a distance of 
about 350 miles. 

The duration of the loan is forty years. Amortization 
will commence with the eleventh year from the date of the 
loan. After twenty years the outstanding amount of the 
loan may be reduced by paying £102^ for each £100 bond. 
The loan is secured by a specific and first mortgage upon all 
lands, materials, rolling stock, buildings, property and pre- 

1 Cf. supra, p. 141, foot-note. 

2 Ibid. 



387] INTERNATIONAL CO-OPERATION i~g 

mises of every description purchased or to be purchased for 
the railway, and on the railway itself, as and when con- 
structed, and on the revenues of all description derived 
therefrom. This provision differs from that of the Tientsin- 
Pukow agreement in which internal revenues and Likins 
of the several provinces the road traverses were pledged as 
security. The control and construction of the railway are 
vested entirely in the Chinese Government. 

By the preliminary agreement dated January 6, 1899, 
it was stipulated that the terms and conditions of the present 
agreement should be subject to the terms and conditions 
contained in the final agreement concerning the Shanghai- 
Nanking railway. Article 12 of the Shanghai-Nanking 
agreement provides for participation by the lenders in the 
net profits of the road after certain charges have been met, 
to the extent of 20 per cent. Net profit certificates were to 
be issued to the lenders to the amount of 20 per cent of the 
nominal capital of the loan. In this agreement the British 
waived their rights under the old preliminary agreement by 
retaining, in commutation of this participation in net profits, 
a lump sum of £120,000 out of the proceeds of the loan. It 
is also provided in this agreement that " no further payment 
in respect of commutation of profits will be allowed on any 
supplementary loans." 

The Shasi-Shingyifu Raihvay ^ 

Aside from the above improvements made in contracting 
foreign loans for railway construction, China has also made 
some marked progress in other directions by adopting what 
many other countries have used in carrying on important 
public works, i. c, the " percentage contract construction 

1 Far Eastern Review, Dec, 1913, pp. 248-9; July, 1914, p. 52; Dec, 
1914, pp. 220-224; Jan., 1915, pp. 302-08. 



!6o RAILWAY PROBLEMS IN CHINA [388 

system." The system is that a contract is made by the 
Government with an experienced contracting party (mostly 
engineering firm or firms) of high financial standing to 
finance and construct a railroad, providing that a certain 
percentage of profit shall be allowed by the Government to 
the contractor over the actual cost of construction and 
equipment and that the Government is to supervise the entire 
work during and after its construction. " It is an equitable 
system for carrying on large public works where it is im- 
possible to make an accurate estimate at the time of entering 
into a contract." 

This system was introduced for the construction of this 
road. The Shasi-Shingyifu railway contract is a modifica- 
tion of the one signed by Dr. Sun Yat-sen with Lord 
French on July 4, 19 13, providing for a railway between 
Canton and Chungking. 1 Mr. Rea, Technical Secretary 
of the Chinese National Railway Corporation, who was 
entrusted with all negotiations for loan contracts in Europe 
by Dr. Sun, took to himself all the credit of introducing 
this new system into China. Feeling confident that the 
great construction firms could build the railways more " eco- 
nomically and expeditiously " than could the individual en- 
gineers nominated by the official banking groups under the 
prevailing departmental system in which the bank is the 
principal to the contract, Mr. Rea decided to invite the large 
contracting firms of high financial standing to participate in 
the development of Chinese railways. He succeeded in 
initiating in London in April, 191 3, an agreement with 
Messrs. Pauling and Company for the construction of a 
line from Canton to Chungking under a contract in which 
the contractor's profit was a fixed percentage over and above 
the actual cost of construction and equipment of the road. 

1 Cf. supra, p. 122. 



389] INTERNATIONAL CO-OPERATION ^1 

After the dissolution of the Chinese National Railway 
Corporation, the Government refused to recognize the valid- 
ity of any agreement entered into by Dr. Sun. However, 
having become convinced of the soundness of the principle 
underlying the Canton-Chungking railway contract of rail- 
way construction on a percentage basis, the Government 
negotiated another agreement for the Shasi-Shingyifu line 
which was considered of more political importance for the 
present than the Canton-Chungking line. The Shasi- 
Shingyifu railway extends from a point near the city of 
Shasi on the Yangtsze River, in the Province of Hupeh, 
through Lichow, Changteh, Shenchow, Yuanchow, Chen- 
yuan, Kweiyang and Aushunfu to Shingyifu, in the south- 
western corner of the Province of Kweichow, with a branch 
from Changteh to Changsha, the capital of Hunan province. 

On July 25, 19 14, the final agreement was signed between 
the Chiao-tung Pu and Messrs. Pauling and Company, Ltd., 
for a loan of £10,000,000 at five per cent interest. The life 
of the loan is forty years. In this agreement there are 
several points which do not appear in any of the previous 
agreements, viz. : 

1. The railway is to be constructed by contract. 

2. The Chinese Managing Director is to co-operate with a 
firm of British consulting engineers in drawing plans and 
supervising the work. 

3. A firm of British accountants is to be engaged to keep 
the accounts of the loan, which is secured on the railway 
and the properties connected therewith, and is also guaran- 
teed by the Government. 

4. Specifications and costs must be first approved by the 
Chinese authorities. 

By inserting such an arrangement, in addition to the 
other advantageous terms stipulated in the other new loan 



1 62 RAILWAY PROBLEMS IN CHINA [$g 

contracts, it is believed that China can control and supervise 
the road better and that the road can be built much more 
economically and with greater efficiency than by following 
the usual stringent terms of the old departmental system 
of construction. 

Independent firms and interests (financiers and manu- 
/facturers) had been debarred for many years by the official 
banking groups from entering the field in China for the 
purpose of competing in railroad building. The Shasi- 
Shingyifu agreement may be considered as the first^ stroke 
against the monopoly enjoyed for many years by the official 
banking groups and enforced by them from time to time 
through the tactics of diplomacy and " dirty politics." 



CHAPTER X 

The Manchurian Railway Problems 

After the Russo-Japanese War, by the terms of the 
Portsmouth Peace Treaty (September 5, 1905), the 
Japanese Government, with the consent of the Chinese Gov- 
ernment, took over the line extending from Port Arthur 
up to Kuangchengtze, a distance of 508 miles, together with 
such rights connected with the railway as had been conceded 
to Russia. On December 22, 1905, Baron Komura, then 
Japanese Minister at Peking, negotiated a convention — the 
Manchurian Convention 1 — and received confirmation from 
the Chinese Government regarding the transfer to Japan 
by Russia of Talienwan and Port Arthur and all rights un- 
der the lease of the Liaotung peninsula. According to the 
Supplementary Articles of the Convention, Japan secured 
from China also ( 1 ) the right to construct a branch line 
from Mukden to Antung (planned to connect with the 
Korean trunk line at the terminus of Wiji, opposite to 
Antung on the Yalu River,) and (2) the right to partici- 
pate in the construction of a second branch further north, 
between Kuangchengtze and Kirin. 

The South Manchuria {Nanman) Railway System ' 
After this railway system had been taken over by Japan 

1 For full text of treaty (translated into English), see Journal of the 
American Asiatic Association, Feb., 1006, pp. 19-20. 

2 Far Eastern Review, Feb., 1909 (whole issue) ; China Year Book, 
1912-1914, Ch. on Communications; Journal of the American Asiatic 
Association, Dec, 191 1, pp. 339-45- 

391] 163 



^4 RAILWAY PROBLEMS IN CHINA [392 

from the Russians, under the Japanese Imperial Ordinance x 
of June 7, 1906, the South Manchuria Railway Company- 
was organized with an authorized capital of 200,000,000 
yen of which 100,000,000 yen were paid up by the 
Japanese Government and 20,000,000 yen were subscribed 
by the Mikado's subjects, i.e., the actual capital of the 
company is now 120,000,000 yens. The company was 
formed with this capital for : ( 1 ) taking over, developing 
and operating the railways already constructed, except the 
Antung— Mukden light railway and its accessories; (2) 
improving the Nanman and the Antung-Muken railways 
with the exception of the property in the Leased Territory 
which should be specially designated by the Government; 
and (3) working the coal mines at Fushun and Yentai. 

The Japanese Government guarantees the payment of 
interest at the rate of 6 per cent per annum on the paid-up 
capital of the company for fifteen years after the registra- 
tion of its organization. It was provided that the subsidy 
shall in no case exceed 6 per cent of the paid-up capital and 
that the subsidy with an interest of 6 per cent shall be 
made a liability of the company to the Government, repay- 
able from the excess of the company's dividends above 10 
per cent per annum on all shares. 

In the Japanese Imperial Ordinance, it was provided that 
the South Manchuria Railway Company should be a 
Chinese- Japanese organization but for some reason the peo- 
ple of China could not avail themselves of the opportunity 
to buy shares. On the other hand, certain branch lines and 
collieries, notably the Yentai and Fushun mines, which were 
Chinese private properties although a certain amount of 
Russian capital was invested in them, were listed by Japan 
as the property of the South Manchuria Railway Co. 

1 Journal of the American Asiatic Association, Oct., 1906, pp. 266-8. 



393] THE MANCHURIAN RAILWAY PROBLEMS rf- 

As the result of the intimate association of the company's 
organization with the Japanese Government the company 
has assumed various functions which render it somewhat 
like a Colonial Administration. The company is empow- 
ered : ( i ) to engage in mining, marine transport, electric "" 
works, sales in consignment of the principal goods carried 
by rail, warehousing business, and construction and ad- 
ministration of land and houses on the land belonging to 
the railway; (2) to make the necessary provisions for edu- 
cation, health, and engineering work within the limit of the 
land belonging to the railway; (3) to collect fees from in^"] 
habitants within the limit of the land belonging to the rail- , 
way from which to defray the expense for the items quoted 
above. 

In fulfilment of an agreement entered into in June, 1907, 
with the Russian Government, the railway line and prop- 
erties to the south of Kuangchengtze station, together with 
the coal mines of Shikpailing and Taochiatun, as well as 
other appurtenances, were formally transferred to the South 
Manchuria Railway Company, between July 15 and July 
18, 1907. 

In order to provide the necessary funds for widening the 
tracks and making immediate improvements of the railway 
system, the company has issued in London three separate 
issues of debentures of a total amount of £8,000,000 at the 
uniform rate of interest of 5 per cent, both principal and 
interest being guaranteed by the Japanese Government. 

In April, 1907, the railway had already been re-opened 
to traffic. The Russian five-foot gauge on the southern 
section of the Eastern Chinese Railway had been reduced 
to three feet six inches, during the war, in order to enable 
the Japanese military engineers to operate the line with 
rolling stock from Japan, where the railways are all con- 
structed either on the tf/t' or 2^2' model. In 1908, the 



1 66 RAILWAY PROBLEMS IN CHINA [ 394 

main line and branches (except the Antung-Mukden branch) 
were converted from the narrow gauge to the standard 
guage of 4 Sy 2 ", which is the uniform gauge on most of the 
railways in China. 

The railway is protected by a large force of Japanese 
stationed at different points along the main and the branch 
lines. This policing administration is under the supervision 
of the Japanese governor-general of the Leased Territory, 
who has charge also of elaborate postal and telegraph sys- 
tems. Also, the Manchurian Consular Courts have civil 
jurisdiction in the railway settlement. 

The South Manchuria railway is an instrument in the 
hands of the Japanese Government for the promotion of 
exclusive Japanese interests in South Manchuria. Owing 
to the discrimination and rebates of rates in favor of 
Japanese firms foreign goods other than those of Japanese 
manufacture have suffered a great deal. In connection with 
her ownership of the road many exclusive privileges were 
claimed by Japan in her encroachment upon China's sover- 
eign rights, and a complete repudiation was demanded of 
the " open door " doctrine which Japan had occasion, time 
and again, to declare to the Powers. 

In order to develop the terminal of the road, at Dalny 
(Dairen), in the Leased Territory, the railway company 
allowed reduced rates to the shipper who shipped his goods 
through Dalny. Newchwang, the natural port of Man- 
churia and the headquarters of foreign firms engaged in 
the Manchurian trade, is thus subject to a severe competition 
and its prosperity dwindles. This is a case not unlike the 
local discrimination so often found in the United States. 



395] THE MANCHURIAN RAILWAY PROBLEMS rfy 

The Antung-Mnkdcn Railway l 

This road was originally a narrow gauge line, hurriedly 
constructed to meet the military exigencies of Japanese 
operations during the struggle with Russia. Under Article 
VI of the supplementary agreement to the Manchurian 
Convention (December 22, 1905), Japan acquired the right 
to improve and operate this line for a period of eighteen 
years from the date of the agreement, after which the 
Chinese Government may purchase the line at a price to be 
based upon an appraisal of all properties by a foreign ex- 
pert selected by both parties. 

It was also stipulated in the same Article that : ( 1 ) the 
conveyance by the railway of the troops and munitions of 
war of the Chinese Government prior to such sale; (2) the 
despatching of a Commissioner by China who was to be 
consulted by the persons undertaking the work on behalf 
of Japan in regard to the manner in which the improvements 
of the road were to be effected; and (3) the appointment 
of another Commissioner to look after the business relating 
to the railway, shall be dealt with in accordance with the 
regulations of the Eastern Chinese Railway. 

Then there arose a controversy over the interpretation 
of the agreement. Viceroy Hsi Liang of Feng Tien pro- 
vince took the view that, although the treaty provided for 
the improvement of the road, it did not provide for its 
reconstruction, and what China meant was that Japan might 
repair the line to adapt it for the conveyance of goods with- 
out any change of gauge. Japan turned a deaf ear to this 
argument and proceeded at once to begin the work of recon- 
struction. China proposed to submit the matter to the 
Hague for adjudication. Japan refused. 

1 Far Eastern Review, Nov., 1009, pp. 295-6; Journal of the American 
Asiatic Association, July, 1909, pp. 183-4. 



1 68 RAILWAY PROBLEMS IN CHINA [396 

The conversion of the line into a standard gauge was 
commenced in August, 1909, and was completed in 191 2. 
The total length of the new line is about 170 miles. By 
the completion of the bridge over the Yalu River, through 
communication on a standard gauge from Fusan (in Korea) 
to Mukden was established. The road is operated under 
the management of the South Manchuria Railway Company. 
It is considered a foreign railroad because its status is 
similar to that of the Eastern Chinese Railway. The road 
is of great commercial and political importance. 

The Hsinmintun-Mukden and Kirin-Changchun Railways 

On April 15, 1907, an agreement 1 was made between 
China and Japan for the repurchase by China of the Hsin- 
mintun-Mukden railway (3^2' gauge and 40 miles long) 
constructed by the Japanese military authorities during the 
Russo-Japanese War, by paying to Japan a sum of gold yen 
1,550,000, a portion of which, representing half the cost 
of the section east of the Liao River, is to remain on loan. 
In the same agreement it was provided also for a loan from 
Japan for the construction of the Kirin-Chanchun line pro- 
jected by China. It was also agreed that, with the exception 
of the periods in which the loans are to be repayable, the 
conditions of these loans and the regulations for the man- 
agement of the railways shall be in all respects similar to 
those of the loan contract of the railways inside and outside 
Shanhaikwan. The most important conditions are as 
follows : 

1. The periods in which the loans shall be repaid shall 
be, for that of the Hsinmintun-Mukden line east of the 
Liao River, eighteen years, and for that of the Kirin- 

1 Chung Hwa Fa Kwei Tai Tsueuen, treaties, vol. xii, leaves 33-37; 
Kent, Ry. Ent. in China, app. A, no. 6. 



397] THE MANCHURIAN RAILWAY PROBLEMS rfg 

Changchun (Kuangchengtze) line, twenty-five years. No 
repayment in full of these loans shall be allowed before the 
expiration of the periods named. 

2. The security for the loan from the South Manchuria 
Railway Company for that part of the Hsinmintun-Mukden 
line east of the Liao River shall be the real property of the 
aforesaid section and its earnings. The security for the 
mercantile shares to be issued by the Kirin-Changchun Rail- 
way Administration, as well as for the loan from the South 
Manchuria Railway Company, shall be the real property of 
the railway and its earnings. 

3. The loans and the interest thereon are guaranteed by 
the Chinese Government. 

4. During the period of the loans a chief engineer and 
an accountant for each of the lines shall be Japanese and 
shall act with the Chinese Director-General. 

5. The railways mentioned being Chinese Government 
lines, this government shall have the right to transport sol- 
diers and subsistence over each line free of charge, when- 
ever military affairs or measures of relief shall require. 

6. All earnings of the railways in question must be 
deposited in Japanese banks. 

On November 12, 1908, a supplementary agreement ' 
was concluded providing for a loan of 320,000 yen (half 
the cost of the section) for that section of the Hsinmintun 
line east of the Liao River, and a loan of 2,150.000 yen 
(half the cost of the line) for the Kirin-Changchun line, 
issued at 93 and bearing interest at 5 per cent respectively. 

The tracks of the Hsinmintun-Mukden line were then 
converted to standard gauge. The regular management of 
the line has now been taken in charge by the Administration 
of the Chinese North Railways. 

1 Kent, op. cit. 



1 7 RAILWAY PROBLEMS IN CHINA [398 

Construction on the Kirin-Changchun line was com- 
menced in 1910 and completed in October, 1912. It is about 
80 miles in length. 

It is planned to extend the Kirin-Changchun line to 
Hoiryong, the principal town of Chientao, a distance of 200 
miles. When completed the line will be of great commercial 
and strategical value. It will contribute to the development 
of commerce between China, Korea and Japan. The con- 
ditions under which the line is to be built may be similar 
to those of the Kirin-Changchun line. 

The Attempt to Neutralise the Manchurian Railways 1 

Thus we see that Manchuria is divided into three railway 
spheres, one served by the ..Chinese Government Railways 
of North China, another, which expands as it extends north- 
ward into Kirin province, by the Japanese South Manchuria 
railway system, and a third by ^Russia's Chinese Eastern 
Railway. Russia and Japan have special interests in North 
and South Manchuria respectively. When China at- 
tempted to induce foreign capital other than Japanese and 
Russian to build new railways there, or when any other 
nationality wished, itself, to invest money in Manchuria 
for railway construction, strong protests were usually met 
with from either Russia or Japan or both. 

American capitalists have taken great interest in Man- 
churian railway affairs because American commerce had 
once occupied a very prominent position in Manchuria. 
Immediately after the Russo-Japanese War, the late Mr. 
E. H. Harriman, the American railway magnate, concluded 
with Marquis Ito and Marquis Katsura a memorandum of 

1 Bland, Recent Events and Present Policies in China, passim. Far 
Eastern Review, Apr., 1910, pp. 526-9; Nov., 1909, pp. 228-9; Feb., 1909, 
pp. 294-9. Jour, of the Amer. Asiatic Assn., Feb., 1910, pp. 4-7; Sept., 
1910, pp. 232-243. 



399] THE MANCHURIAN RAILWAY PROBLEMS t yj 

agreement for a joint American- Japanese ownership and 
working of the South Manchuria Railway. This joint 
working scheme, to be financed with American capital, was 
to form a link in Mr. Harriman's projected round-the-world 
transportation system. But when the Japanese statesmen, 
fully appreciating the tendency of world politics in the 
future, wanted to nullify what they had promised Mr. 
Harriman, they put the blame upon the Chinese Govern- 
ment by duly informing Mr. Harriman that the Chinese 
Government would not consent to the admission of Ameri- 
can capital into the South Manchuria Railway system, since 
they desired themselves to join the Japanese in working it. 
As a matter of fact, China was kept absolutely ignorant of 
Mr. Harriman's proposals. Contrary to the Japanese 
statements, as we shall see, China was endeavoring to enlist 
American capital for the development of Manchuria. 

In 1906, Russia had also at one time approached Ameri- 
can capitalists with an offer to sell the Chinese Eastern 
Railway. 

In August, 1907, Mr. T'ang Shao-yi, appointed Governor 
of Feng Tien, endeavored to enlist the active sympathy and 
support of the United States and Great Britain by offering 
opportunities for railway construction to American and 
British capitalists and contractors. Mr. T'ang suggested 
to Mr. W. Straight (U. S. Consul-General at Mukden, now 
president of the American Asiatic Association) that a Man- 
churian Bank with American capital be formed to act as 
the financial agent of the Government of Manchuria, and. 
in co-operation with Messrs. Pauling & Company, of Lon- 
don, to undertake the construction of a line from Eisin- 
mintun to Aigun, together with other enterprises, " for the 
development of commerce and industry of Manchuria." with 
which, under the Portsmouth Treaty, Russia and Japan had 
agreed not to interfere. The project was delayed by the 
financial panic of 1907 in the United States. 



1 72 RAILWAY PROBLEMS IN CHINA [400 

After the panic, in the summer of 1908, Mr. Straight 
carried with him to Washington a memorandum, signed by 
the Governor of Mukden, which was to form the basis of 
negotiations for a loan of £20,000,000, for the establish- 
ment of the Manchurian Bank. Meanwhile, an agreement 
was reached between Lord French representing Messrs. 
Pauling and Company, Mr. J. O. P. Bland representing the 
British and Chinese Corporation, and the Manchurian Gov- 
ernment for the construction of a railway running from 
Tsitsihar to Chinchow. The American capitalists, or, 
rather, the Manchurian Bank, was to undertake the exten- 
sion of this line from Tsitsihar to Aigun — the total length 
of the line being about 750 miles. In November, before 
Mr. T'ang's arrival at Washington to discuss in person the 
details of this project, besides other matters, Messrs. Kuhn, 
Loeb and Company had declared to the State Department 
their willingness and readiness to finance the Manchurian 
Bank. By the death of the Emperor Kuang-su and the 
Empress Dowager, Mr. T'ang's mission failed, because of 
the lack of support from the Prince Regent who dismissed 
Mr. Yuan Shi-kai (then Grand Councillor), the chief sup- 
porter of Mr. T'ang's policies. 

In December, the Russian Government again opened nego- 
tiations with certain New York bankers for the sale of the 
Chinese Eastern railway, provided, however, that Japan 
would agree to sell the South Manchuria railway. Accord- 
ing to Mr. T'ang's statements China would welcome such 
action on the part of the Russian Government. It was 
hoped that an international syndicate might be organized 
to purchase both railways on behalf of the Chinese 
Government. 

Mr. Knox, American Secretary of State, then addressed 
simultaneously the Chinese, British, German, Russian and 
Japanese Governments, proposing to authorize the organi- 



4 Ol] THE MANCHURIAN RAILWAY PROBLEMS ij$ 

zation of an international syndicate which would buy i >ut 
the Russian and Japanese railway interests in Manchuria. 
At the same time Air. Knox also suggested to the govern- 
ments mentioned, with the exception of Russia, that if the 
Powers were unwilling to join in the general neutralization 
scheme they should at least unite in financing and construct- 
ing the Chinchow-Aigun railway. Learning this second 
proposal, the Russian Government suspected that the Ameri- 
can Government was playing a double game. Russia and 
Japan then politely but firmly rejected Mr. Knox's pro- 
posals. The so-called neutralization scheme of Mr. Knox 
thus became a failure. The immediate result of this neu- 
tralization scheme was the formation of the Russo-Japanese 
entente (agreement signed on July 4, 1910) to divide the 
Manchurian and Mongolian interests between themselves. 

The intentions of the United States Government were 
just. Its policy aimed at "taking the railways of Man- 
churia out of Eastern politics and placing them under an 
economic and impartial administration by vesting in China 
the ownership of the railways :" in other words, it wished 
to place Manchuria under an " international economic pro- 
tectorate," pending such time as China could control it her- 
self independently. Theoretically it seemed to be a fair and 
satisfactory arrangement but when tried in practice it re- 
quired mutually altruistic aims and harmonious relations 
between the Powers. 

Furthermore. Mr. Taft's Administration at Washington 
erred in placing the Chinchow-Aigun r< >ad in the same cate- 
gory in the neutralization scheme as the Chinese Eastern 
and the South Manchuria railways. They overlooked the 
fourth Article of the Portsmouth Treaty in which Russia 
and Japan had pledged themselves "not t<> obstruct any 
general measures, common to all countries, which China 
may take for the development of commerce and industry 






Ij4 RAILWAY PROBLEMS IN CHINA [402 

in Manchuria." By this Article China was strictly entitled, 
at her discretion, to construct the Chinchow-Aigun line. 
For China's interests the two questions should have been 
treated separately. 

When the neutralization scheme failed, the United States 
proceeded independently in the matter of the Chinchow- 
Aigun railway. But the Russo-Japanese entente had al- 
ready become effective. Russia denounced the Chinchow- 
Aigun project as a design for attacking Russian territories 
in Eastern Siberia and Russia's " special interests " in 
Mongolia and Manchuria. 

On the other hand, when the Japanese learned that nego- 
tiations for the loan agreement and the construction con- 
tract were in progress, their Government entered an em- 
phatic protest, forbidding the Chinese Government to ex- 
tend the Imperial Railways northwards from Hsinmintun, 
basing its prohibition on the Manchurian Convention of 
December 22, 1905, asserting that the extension would seri- 
ously compete with the South Manchuria road. Finally 
the proposition of the Chinchow-Aigun project also failed. 

Judging from the attitude and the actions of the Japanese 
Government in those days, one need not have waited until 
the outbreak of the present World War to know that a 
•clash between China and Japan in regard to the Man- 
churian railways is inevitable. Japan always desired to 
extend the life of the lease of the Peninsula and the South 
Manchuria railways. Article III of the Port Arthur and 
Talienwan agreement of March 27, 1898, provided that the 
duration of the lease should be twenty-five years, and Article 
VIII provided that the Chinese Eastern Railway should 
revert to China at the end of eighty years and might be 
repurchased at the end of thirty-six years. By the Treaty 
of Portsmouth, as we have pointed out, Russia's rights 
were transferred to Japan and were officially recognized by 



403] THE MANCHURIAN RAILWAY PROBLEMS xyc 

the Chinese Government in 1905. The situation is this, 
namely, that in 1934, nineteen years hence, China may re- 
purchase the line at its actual cost. But previous to this, 
in 1923, or eight years from date, the lease of the Liao- 
tung Peninsula, including the ports of Dalny and Port 
Arthur, expires. Japan's policy is to embark on various 
grand schemes of development and expansion so that she 
may control more effectively South Manchuria. But she 
has no funds. With the short-life lease she cannot negoti- 
ate in the financial markets of the world the necessary loans 
for the improvement of Dalny or Port Arthur. It is plain, 
therefore, that Japan must receive some assurance from 
China that the lease will be extended, in order that she may 
secure loans abroad. 

The World War gives Japan the chance to achieve her 
purposes. Harsh demands are sent to Peking. Negotia- 
tions are now pending. The crisis comes. China's sover- 
eign rights and integrity and the principles of the " open 
door " have been and are unmistakably threatened. Shall 
China yield or shall she fight? Had Mr. Knox's neutrali- 
zation scheme been successful, such serious complication 
might not now be arising. Granted that Japan secures what 
she demands, the Manchurian questions which have become 
mixed up with the "open door," equal opportunities, sover- 
eign rights, etc., will still remain to be solved. Further 
dissensions and conflicts (probably armed conflicts) will be 
inevitable. 



CHAPTER XI 
Conclusion 

With a period of over fifty years of railway development, 
China now has only 5,980 miles of railway in operation and 
a little over 2,000 miles under construction. 1 In comparison 
with countries such as the United States, Argentina, India, 
and others, the progress made in railway construction in 
China has been exceedingly slow, especially when we con- 
sider her vast territory and dense population. The reasons 
are many. 

Opposition 

At the very beginning when there was very little foreign 
influence, strong opposition to foreign improvements and 
/national antipathy to innovations were quite common. 
Many writers attributed these objections to the supersti- 
tious fear of trespassing upon ancestral tombs. This super- 
stition, however, has slight weight, with the lower and more 
ignorant classes only. Of course, there exists among all 
people in the world a strong prejudice against any innova- 
tion, but this prejudice can be, and has been, easily over- 
come whenever the innovation gains official support and 
encouragement. 

The opposition to railway construction from the educated 
''and official classes deserves more serious consideration. 

1 Up to the early part of 1914, China Proper has 5,980 miles of rail- 
way in operation and 2,065 miles under construction. In other words, 
she has .03 miles of line to every 100 square miles of country and .18 
miles to every 10,000 inhabitants. China Year Book, 1914, p. 215. 
176 [404 



405] CONCLUSION ijj 

Again, here, many writers have blamed the short-sighted- 
ness of these classes for preventing the general enlighten- 
ment of the country in order that they might retain their 
own prerogatives and power. These writers overlook the 
fact that the social, political and economical systems of 
China have been fully adjusted and were crystallized cen- 
turies ago. Naturally, it is not to be expected that these 
people would adopt without hesitation or inquiry the West- 
ern systems which were new and untried. Of course, those 
officials who were ultra-reactionary in tendency and who dis- 
couraged the introduction of railways should bear the 
blame for delaying the progress of railway construction. 

It was the labor question which brought from the in-, y? 
telligent people of China the most serious objections to the 
introduction and development of rapid transportation. The 
railway throws the old means of transportation into disuse. 
It was feared that the boatmen, the carters, the packmen, 
and the porters would be deprived of their means of sup- 
port and existence. This fear was manifested by the junk 
men of the Peiho River, the inhabitants of Tungchow, and 
the carters of Tientsin and Peking. This led some intelli- 
gent officials and merchants to the belief that what China 
needed was not condensation of work but expansion; in 
other words, not an increase in the working capacity of man 
by substituting machinery, but a sufficiency of work for the 
normal capacity of man's unaided hands. This may be 
true in some industries in China but not in railway trans- 
portation. At the very beginning it was true that some of 
the boatmen, carters, and others were affected, as in the 
case of the Government Railways of North China, but this 
was soon adjusted. In course of time the fears of the 
ruinous competition of the railway were found groundless 
as had been discovered in other countries. The railway, 
instead of decreasing, really increased the employment of 



178 RAILWAY PROBLEMS IN CHINA [ 4 q6 

these laborers in transporting goods at higher wages by 
diversifying and developing new means of trade. Now, 
hostility from these people who are still making their liv- 
ing by old methods of transportation has practically dis- 
appeared. 

In some cases, however, hostility to railways was caused 
by the shameful maltreatment of the laborers by the for- 
eigners who took charge of the actual work of construction. 

There was also complaint that the people were not will- 
ing to part with their land. China is a country of small 
landowners. It is not to be denied that it requires time t< > 
_^~ deal with them in order to obtain the necessary land for the 
right of way, but this difficulty can be, as it has. been, ad- 
justed by a fair valuation and honest dealing. 

All the cases of opposition were found to arise almost 
entirely within the first period of railway development in 
China. Later, when the people became more familiar with 
this new system of transportation, almost all the unreason- 
able objections were withdrawn. 

Hindrances 

It is the problem of delay in railway construction that 
should be seriously considered. " Dirty politics," internal 
and international, has been the chief factor causing grievous 
retardation to railway development in China. Before the 
demarcation of their respective spheres of interest, each 
government of the Powers concerned protested against 
others' activities in certain parts of the country and endeav- 
ored to place obstacles in the way of any enterprise of its 
opponents. When the question of their respective spheres 
of special activities in different fields had been settled, offi- 
cial banking groups were designated by the different govern- 
ments to exploit the country. Each group had practically 
a monopoly to undertake railway construction. Every one 



4 oy] CONCLUSION I79 

of them had its hands too full of concessions which were, 
therefore, unduly delayed in fulfilment. The unscrupulous 
concessionaires took advantage of a weakened government 
to secure more than their due. Naturally an awakened 
people will object to the sacrifice of public interests under 
the pretence of development; hence the stubborn hostility 
to foreign concessions, and hence the delay in almost every 
case by months and even by years of the conclusion of loan 
agreements. 

Working hand in hand with these political groups were 
the so-called syndicates, speculators, groups of men and 
of interests primarily not associated with railway construc- 
tion, coming into the country to exploit " flowery Chung 
Hwa," by raising to an absurd figure the capital cost of the 
railways built. According to Mr. G. B. Rea's analysis of 
the railway situation in China, 1 the average cost of railways 
built under foreign loan agreements is $45,000 gold per 
mile, while serviceable railways can be constructed and 
equipped for $20,000 to $30,000 gold per mile when built 
without foreign interference. 

Furthermore, the Government had no effective control 
over these syndicates. The result was that the syndicates 
were permitted to_float loans without first submitting to 
the Government definite surveys and construction tenders, 
which would have afforded a check on capital expenditures 

1 Mr. Rea's conclusion of his famous analysis is briefly as follows : 
China could more than double her railway building if unmolested in 
the administration of her affairs. The same amount of money would 
be expended, while the orders to foreign manufacturers for cars, loco- 
motives and railway supplies would be doubled. What the bankers, 
purchasing agents, and staff employees would lose would be repaid to 
the foreign manufacturers ten times over, and in the end bring just as 
much profit to the banks as though they held out for the continuance 
of a system in which they are at present the greatest beneficiaries. 
Far Eastern Review, Nov., 1909, pp. 215-227. 



180 RAILWAY PROBLEMS IN CHINA [ 40 g 

and would have made the concessionaires and not the Gov- 
ernment liable for any expenditure not expressly specified 
in the final agreement. All the above hindrances were 
chiefly caused by the international jealousies of the great 
commercial Powers and the short-sightedness of the for- 
eign financiers. 

We now come to the internal retarding forces which 
have blocked the progress of the railway, and which should 
be more seriously taken into consideration than the external 
forces. First of all, we find the enormous defects of the 
old order of things, the constant" change of policies and 
the vacillation of the old Government, xausingHrr-kating 
friction with the people. The outcome of these was the 
hot-headed agitation against foreign enterprises and gov- 
ernment ownership of railways. Such an extreme attitude, 
assumed by the radical elements of the people, destroyed that 
mutual confidence which is so necessary to progress and 
naturally retarded the very process of evolution or develop- 
ment in railway as well as in other industries. 

This unsettled state of affairs in the country accounts 
'for a great deal of the delay in railway construction. The 
famines, the brigandage and the frequent rebellions, as re- 
sultants of the economic pressure, the over-population and 
the lack of food supply, have been the chief causes of un- 
rest in the country. These things paralyze the commerce 
and industry of a country, put the people in destitution and 
absorb the surplus energy. One of the results of this busi- 
ness paralysis was the lack of capital for investment in the 
railways, hence the failure of the private enterprises; an- 
other result was the loss of revenues and credit, hence the 
Government had to accept foreign loans under humiliating 
conditions, and hence its reluctance to launch any new or 
large railway enterprise. 

The people of China possess mental power of organiza- 



409] CONCLUSION jgj 

tion. Their habits of thinking systematically and of act- 
ing methodically lead directly to organized effort. The 
mutual aid associations, the temperance societies, and the 
secret social fraternities are notable illustrations of this or- 
ganized effort. Above all, they have the more definite com- 
mercial and labor combinations. The provincial clubs or 
" guilds " are organized to control the market, regulate 
prices and avoid cut-throat competition. The labor com- 
bines are formed to promote the interest of the working- 
men. But the deficiency of skilled workmen and profes- 
sional experts in every line of modern improvements, the 
virtual absence of the modern mechanism of money and 
stock exchanges, and the ignorance of new corporation sys- 
tems have tied the hands of many vigorous railway prpo- 
moters, entrepreneurs and financiers. 

Dangers 

The aggressive policy (the policy of economic and geo- 
graphical gravitation) of Russia and Japan as the outgrowth 
of military aristocracy in those lands, has caused clashes 
and hostility between these powers and other countries who 
have interests in the Orient. We have seen that by a series 
of exceedingly shrewd moves, Russia had secured predomi- 
nant influence in Peking, had extended her railways into 
Manchuria, had assumed virtual control over a large part 
of its territory, and thus had led to the great war in the 
Far East at the dawn of this century. After the revolt of 
the Khalka Mongol princes, Russia again manifested her 
" forward policy," inaugurated by the Russo-Japanese en- 
tente (July 4, 1910), by demanding the autonomy of Mon- 
golia, by making loans at the same time to the provisional 
government of North Mongolia and by securing provisions 
for railway construction in that vast region. After Japan 



lS 2 RAILWAY PROBLEMS IN CHINA [410 

and Russia united to veto the proposed construction of the 
Chinchow-Aigun railway, the Russians suggested at once 
to the Chinese Government, as an alternative scheme, the 
construction by China of a railroad from Kalgan to Urga 
with the intention of connecting with the Siberian Railway 
via Kiakhta, thus shortening the distance between Irkutsk 
and Peking by about 800 miles. This is no doubt a costly 
and strategic undertaking. Russia wanted China to do it. 
What was her intention? She intended to repeat the same 
old trick she had played in Manchuria. In addition to this 
scheme the Russian Government has also cherished the idea 
of constructing railways from Taskkent to Kashgar, and 
from Bisk to Chuguchak. By means of these prospective 
railways Russia aims to secure the geographical and eco- 
nomic gravitation of North Mongolia and possibly the 
New Dominion. 

Japan wants to stay permanently in Manchuria. She has 
adopted the well-known colonization method of " peace- 
1 / ful penetration " by making use of the railway and the 

bank. Her uncompromising veto of the Chinchow-Aigun 
project and her present unreasonable demands, as the out- 
come of the World War, which she has pressed upon China, 
prove conclusively that Japan is determined not only to 
close the door to equal opportunities in South Manchuria 
but also to prevent the establishment of any vested interests 
other than her own throughout the Chung Hwa Republic. 
The ambitious and unscrupulous statesmanship of the mili- 
tary-aristocratic class of the Japan people has made Japan 
a formidable factor in international diplomacy. She at- 
tempts to undermine the influence and the interests of other 
Powers in China. Can she do it single-handed? Here is 
the danger of a possible future conflict — a conflict sure to 
cause humiliation to China. 

Railway loans floated by China have in the past gener- 



41 1 ] CONCLUSION !g 3 

ally received a government guarantee and have been se- 
cured by first mortgages or by the pledge of provincial 
revenues as security. The proposed hypothecation of 
China's internal revenues for the loans has involved im- 
portant political complications* Whenever internal dis- 
turbances may arise or whatever other unforeseen causes 
may come up to impair the due payment of interest or the 
repayment of principal. China's sovereignty will be at stake. 

General References 
(For the Third Period) 
I. — Official Publications: 

China: Imperial Maritime Customs; III. Miscellaneous Series no. 3. 

China, Treaties, Shanghai, 1908. 

Chinese Texts, same as in the Second Period. 

Great Britain: British Blue Book, China, 1902-1912; and desultory 

Consular Reports. 
The United States: Monthly Consular Reports, 1904-1915. 
Anderson (Geo. E.), Railway Situation in China, Special Consular 

Reports, no. 48. (Washington, D. C, 1911.) 

II. — Treatises: 

Blakeslee (G. H.), editor, Recent Developments in China, New York. 
1913, Clark University addresses, Nov., 1912. 

Bland (J. O. P.), Recent Events and Present Policies in China, Phila- 
delphia, 1912. 

Brunnert (H. S.) and Hagelstrom (V. V.), Present Day Political Or- 
ganisation of China, translated into English from Russian by Belt- 
chenko (A.) and Moran (A. A.), Shanghai, 1912. 

Comite de l'Asie Franchise, Guides Madrolle, Chine du Sud, and Chine 
du Nord, Paris, 1904. 

Denby (Hon. Charles), China and Her People, Boston, 1906, vol. ii, 
chs. xvii and xviii. 

Gibson (Rowland R.), Forces Mining and Undermining China, New 
York, 1914, chs. vi-x. 

Hosie (Alexander), Manchuria, London, 1901, chs. ii-iv. 

Jernigan (T. R.), China's Business Methods and Policy, London 1004. 

Laboulaye (Eduard de), Les Chemins de fer de Chine, Paris, 191 1. 

Maurer (J. H.), The Far East, Reading, 1912. 



^4 RAILWAY PROBLEMS IN CHINA [ 4I2 

Morse (H. B.), The Trade and Administration of the Chinese Empire, 

London, 1908, chs. vii-x (rev. ed., 1913). 
Pott (F. L. H.), The Emergency in China, New York, 1913. 
Reinsch (P. S.), Intellectual and Political Currents in the Far East, 

New York, 191 1. 
Simpson (B. L.), The Coming Struggle in Eastern Asia, London, 1908, 

pt. ii-iii. 
The China Year Book (Bell & Woodhead), New York and London, 

1912-1914. 

III. — Articles: 

Bary (A. J.), " Railway Development in China," in Soc. of Art. lour., 

London, 1909, vol. 57, pp. 541-560. 
Dillon (E. J.), " New China and the Re-grouping of the Powers," in 

Contemporary Review, May, 1912, pp. 714-36. 

" Dual Alliance for the Far East," ibid., July, 1910, pp. 107-19. 

"Russia and China," ibid., Mar., 191 1, pp. 374-9. 

— — ' " Ex criente lux ; ex occidente Knox," ibid., April, 1910, pp. 492- 

503. 

Lapeyriere (J. de), " Notice sur les Chemins de fer en Chine," in Soc. 

de Geog. Commerciale de Paris, 1908, vol. 30, pp. 338-49. 
Lawton (L.), " The Powers and the Far East," in Fortnightly Review, 

May, 191 1, pp. 817-838. 
Maybon (Albert), "Les Chemins de fer chinois," in Nouvelle Rev. 

(Paris, 1907), vol. 165, pp. 202-216. 
Millard (T. F), "America in China," in Forum, July, 1910. 

"Our Blundering Diplomacy in the Far East," in American Mag- 
azine, July, 1910, pp. 817-825. 

Read (T. T.), "China's Great Problem," in Po pillar Science Monthly, 

Nov., 1912, pp. 457-464. 
Weale (P.), "One Solution of the Manchurian Problem," in Annals of 

the American Academy of Political and Social Science," Jan., 

1912, pp. 39-55. 

IV. — Per io dicals : 

The Far Eastern Reviezv, Shanghai, 1908-1915. 

The Journal of the American Asiatic Association, New York, 1905-1915. 



VITA. 



The author was born in Canton, China, September, 1885. 
He attended the Tangshan Railway and Mining College, 
North China, from 1906 to 1910, when he was sent by the 
Government to the United States to study. He attended 
the University of Illinois, receiving the B. S. degree from 
that institution in 1912. He studied Economics at the Uni- 
versity of Pennsylvania during the year 191 2- 13, doing 
seminar work with Professor E. R. Johnson. He received 
the M. A. degree from Pennsylvania in 19 13. As a student 
of the Department of Political Economy at Columbia Uni- 
versity, 19 13-15, he studied under Professors Seligman, 
Clark, Seager, Mussey, Chaddock, Giddings, Tenney, 
Robinson and Hirth, working in the seminars of Professors 

Seligman and Seager. 

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